UK shop price inflation rises to 1.2% in May

Shop price inflation in Britain rose to 1.2% in May from 1.0% in April, the British Retail Consortium reported on Tuesday. The May reading was above the three-month average of 1.1%.

Non-food inflation moved into positive territory at 0.5% year-on-year after a 0.1% decline in April. Food price inflation eased to 2.7% in May from 3.1% in April, the lowest annual rate in a year. Month-on-month, overall shop prices rose 0.5% in May, with non-food prices up 0.8% and food prices down 0.1%.

Within food, fresh food inflation slowed to 3.4% year-on-year from 3.9% in April, while ambient food inflation fell to 1.6% from 2.1%. The BRC said furniture and health and beauty recorded some of the largest price increases among non-food categories.

The trade group pointed to higher raw material and shipping costs, disruptions to trade flows linked to the conflict in Iran, and rising energy bills as drivers of higher non-food prices. The report also noted that some retailers continued promotions on certain lines: prices for TVs and audiovisual equipment fell as merchants discounted ahead of the World Cup.

Helen Dickinson, chief executive of the British Retail Consortium, warned that retailers were facing mounting cost pressures. “Businesses cannot absorb these costs indefinitely,” she said. She called on the government to reduce non-commodity charges, taxes and levies that make up more than two-thirds of energy bills and to cut regulatory burdens to help contain costs.

Mike Watkins, head of retailer and business insight at NIQ, said supermarkets kept promotional activity after Easter, which helped hold food inflation close to year-ago levels. He noted that non-food prices were starting to rise again after a period of deflation and that continued external cost pressures and cautious household spending would likely keep promotional activity high over the summer.

The BRC figures sit alongside official data showing the wider consumer price inflation rate at 2.8% in April. Some analysts expect overall inflation to rise in the coming months as higher energy prices feed through to businesses and households.