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A BRC survey showed three in five retailers expected prices to increase in the run up to Christmas

Food inflation has ramped up to its highest level since November 2020 as spiralling costs led to higher prices on supermarket shelves, with fresh food becoming more expensive for the first time in ten months.

The British Retail Consortium warned this morning of likely further hikes in the run up to Christmas as the labour shortage continues to affect retailers.

Food prices accelerated to 0.5% in October, up from 0.1% in the previous month, according to the latest BRC-NielsenIQ shop price index.

It’s above the 12- and six-month average price growth rates of 0.1% and -0.1%, respectively, and is the highest inflation rate since November 2020.

Following ten months of deflation, fresh food prices rose by 0.3% this month, compared with a fall of 0.4% in September, while ambient food inflation held steady at 0.8%.

Non-food deflation was also steady at 1% in October as ongoing global shortages of materials and supply issues with logistics and shipping continued to put upward cost pressures on products such as furniture.

Overall shop price deflation eased to 0.4% last month, down from a fall of 0.5% in September.

Mike Watkins, head of retailer and business insight at NielsenIQ, said that with food prices slowly increasing, shoppers were expected to start rebalancing basket spend over the next few weeks, particularly with increased concerns about discretionary spend.

“And with consumer sentiment now more cautious, we cannot ignore that availability issues are still top of mind,” he added. “So, consumers will be uncertain about when and where to spend and with Christmas promotions about to kick in, competition will intensify in both food and non-food retailing.”

BRC chief executive Helen Dickinson said: “It is now clear that the increased costs from labour shortages, supply chain issues and rising commodity prices have started filtering through to the consumer.

“Tight margins mean retailers may not be able to absorb all of these new costs, so prices will continue to rise.”

A BRC survey showed three in five retailers expected prices to increase in the run up to Christmas.

“Retailers continue to do all they can ensure value for money for customers and are looking to work with government to find a long-term solution to these shortages, otherwise it is the British consumer, who already face higher energy bills this winter, who will suffer the consequences,” Dickinson added.