Food prices begin creeping upwards

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Food prices started to creep back upwards again last month, adding more misery for cash-strapped consumers and heaping further pressure on the Bank of England to raise interest rates.

The price of food in shops increased 1.2% between March and April, driven higher by the cost of fresh fruit, dairy products, eggs and cooking oils, according to British Retail Consortium (BRC).

Food price inflation had slowed in March as retailers put on more special offers to attract cash-strapped consumers.

This was one of the main reasons the consumer prices index (CPI) fell to 4% in March from 4.4% the previous month.

Chris Crowe, an economist at Barclays Capital, expects the rising cost of food to help push CPI to 4.2% in April.

The Bank of England's Monetary Policy Committee will announce on Thursday whether it is to raise interest rates from their record low of 0.5% in an attempt to curb CPI, which is more than double its target of 2%.

Food prices are rising because so-called soft commodities, such as wheat, coffee and corn, have rocketed in value in the past year, partly as a result of growing demand from emerging markets such as China and India.

The rising cost of food helped push the BRC's index of shop prices up to 2.5% in April from 2.4% in March.

This was despite a 0.1% decline in the cost of non-food items between the two months, as retailers dropped the price of clothes, shoes and electrical items.

The price of non-food items were also driven downwards as retailers put on special offers for Easter.

Stephen Robertson, BRC director general, said: "In the face of falling consumer confidence, retailers' efforts to generate sales with Easter discounts were key to holding back prices on non-food goods.

"But the upward pressures on food prices, which eased in March, bit back in April.

"The consolation for customers is that there is a mass of offers to be had and the fact that 40% of the groceries being bought are on promotion shows that customers are taking up those offers in a big way."