Shop prices are at an 18-year high after inflation accelerated in January, with a warning that the peak is yet to arrive. Prices are now 8% higher than they were last January, up from 7.3% in December and above the three-month average of 7.5%, according to the latest shop price index from the British Retail Consortium (BRC).
Overall food inflation rose to 13.8% from 13.3% in December – the highest inflation rate in the category on record. Inflation on fresh food also reached a record high due to increased food production costs as well as elevated fruit and vegetable prices, accelerating to 15.7% from 15% in December.
Ambient food inflation saw the fastest increase on record as wholesale and bulk prices rose, particularly for sugar and alcohol, accelerating to 11.3% from 11% in December. Meanwhile, clothing and footwear prices eased, allowing consumers to replenish their wardrobes during the January sales.
Read more: The Welsh firm that takes apart decommissioned planes with global growth on its radar
BRC chief executive Helen Dickinson OBE said: "Retail prices rose in January as discounting slowed and retailers continued to face high input costs. Ambient food inflation accelerated the most as wholesale and bulk prices grew, particularly for sugar and alcohol. Fresh food prices also remained high due to increased food production costs as well as elevated wholesale fruit and vegetable prices. Meanwhile, clothing and footwear prices eased, so customers were able to replenish their wardrobes with some bargains during the January sales.”
She added: "With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing. However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak and will likely remain high in the near term as a result.”
Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said: Consumer demand is likely to be weak in Q1 due to the impact of energy price increases and for many, Christmas spending bills starting to arrive. So the increase in food inflation is going to put further pressure on household budgets and it’s unlikely that there will be any improvement in the consumer mind-set around personal finances in the near term.
"With shoppers having less money to spend on discretionary retail having paid for their essential groceries, there will be little to stimulate demand across the non-food channels.”
Most Read
Sign up to the BusinessLive Wales newsletter and follow us on LinkedIn
As well as an in-depth early morning newsletter, we will be sending out regular breaking news email alerts. To sign up to this service
And, follow us on to catch the latest stories and to network with the Welsh business community.
Sara Jones, head of the Welsh Retail Consortium, said: "Welsh households had little respite from the cost-of-living squeeze last month as prices at shop tills spiked further. It’s too early to say if shop price inflation has crested. However, what is certain is that household finances are likely to be strained further in the months ahead by energy bills, mortgages rates, hikes in council tax, and the freeze in income tax thresholds.
“Retailers are striving to support customers by expanding value ranges, fixing prices of some essential goods, and providing discounts for vulnerable groups. However, the sheer weight of costs bearing down on the sector and its supply chain is proving difficult to absorb.”
Read more: