Shoppers pay price as food inflation hits 15-month high
Wednesday 06 October 2010
Hard-pressed shoppers suffered a double whammy last month as food price inflation hit a 15-month high and the cost of clothing also climbed.
Overall shop price inflation hit a five-month high in September, while the annual rate of food price increases jumped to 4 per cent from 3.8 per cent in August.
The cost of food was driven higher as the rising prices of wheat and oil fed through to bread and meat supplies, according to the monthly survey by the British Retail Consortium (BRC) and Nielsen. This was the key reason for overall shop price inflation rising to 1.9 per cent last month – a jump of 0.2 per cent since August. Non-food inflation also rose, by 0.7 per cent.
However, the BRC director-general, Stephen Robertson, said that although previous increases in commodity costs had put pressure on overall prices, the worst may have now passed. "Food inflation is at a 15-month high as the effect of earlier rises in wheat and oil prices work through to things like bread and meat, but these production costs appear to be stabilising now," Mr Robertson said.
Sir Terry Leahy, the chief executive of Tesco, also tried to dampen recent speculation that food inflation was likely to keep soaring. "There is a bit of food price inflation," he said. "It is not quite as high as sometimes you read – it is between 2 per cent to 3 per cent. It may go up a bit but it will not reach the heights of 2007 when it was up between 8 to 10 per cent."
However, Sir Terry added that specific factors, such as the growing consumption of protein in Asia and Latin America, would underpin food prices in years to come.
He said the financial investment by traders in commodities was another feature of today's market that would lead to "more volatility" in food prices in the future.
According to the BRC-Nielsen Shop Price Index, higher clothing and footwear prices pushed up overall non-food inflation by 0.3 per cent between August and September.
Mr Robertson said: "Clothing was largely responsible for non-food inflation increasing for the first time in five months. Clothing is still cheaper than a year ago, and 15 per cent cheaper than five years ago, but rising cotton costs have slowed the pace of those price falls."
The BRC said non-inflationary price pressure would return in 2011 as cotton prices – which are 69 per cent higher than last year – were factored into next year's spring and summer ranges.
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