Annual food price inflation hits 7% as retailers pass on rising costs

Food cost 7 per cent more in British supermarkets in June than it did in the same month last year, a survey showed yesterday. The annual rate of food price inflation jumped from 6 per cent in May to 7 per cent last month, as shops passed on the continuing rises in the cost of global commodities, the British Retail Consortium said.

Rapidly rising food costs also led to a sharp increase in shop price inflation, the BRC said. Prices across the retail sector were up by 2.5 per cent over the year to the end of June. The year-on-year increase in May was 1.8 per cent. Mike Watson, of market research group Nielsen, which compiles the BRC figures, said: "In recent weeks, we have seen more cost price inflation in fresh and chilled foods, as well as in some staple ambient categories. This is adding to the cost of the weekly shopping basket."

The figures will provide a further headache for the Bank of England Monetary Policy Committee, which announces its monthly decision on interest rates today. While the MPC would like to cut rates, with the pace of the slowdown in the economy increasing, continuing inflationary concerns prevent it from doing so.

The sharp rise in food price inflation comes at a time when the leading supermarkets are sparring for customers through special offers and short-time price cuts on certain products. Stephen Robertson, of the BRC, said such deals reflected the desire of shops to protect customers from the worst of soaring global inflation in general foodstuffs. He said: "They are keeping prices to customers down by cutting costs and increasing sales."

But consumer groups are sceptical about the extent of price-cutting. Last month, the price comparison website MySupermarket.co.uk said the cost of a basket of staple food items from Asda had gone up by 26 per cent in the 12 months to 11 June.

Price rises for the same items at Sainsbury and Tesco were also much higher than the BRC's official figures, at 16.2 and 21.1 per cent respectively.

Shop price inflation has been kept low by falling costs, particularly at electrical, clothing and shoe stores. However, the BRC found the annual inflation rate for non-food items was 0.2 per cent over the year to June, compared with a fall of 0.4 per cent in May.