Food inflation falls to lowest in a year but BRC warns it can’t last

Food inflation fell to its lowest level in a year in May, but retailers cannot absorb rising cost pressures for much longer, the BRC has warned.

Annual food inflation in the first week of May was 2.7%, having fallen from 3.1% in April. It was lower than the three-month average, which was also 3.1%, according the latest BRC-NIQ Shop Price Monitor data.

Fresh food inflation dropped to 3.4%, from 3.9% in April, while inflation in ambient food in May was 1.6%, down from 2.1% a month earlier. Both were below the three-month averages of 3.9% for fresh and 1.9% for ambient.

However, non-food inflation rose to 0.5%, from 0.1% deflation in April. It nudged overall shop price inflation up to 1.2%, from 1% in April. The three-month averages were 1.1% for total shop price inflation and 0.1% for non-food.

BRC CEO Helen Dickinson said consumers had “intense competition among supermarkets” to thank for the fall in food inflation.

She warned: “While retailers work hard to keep prices down for customers, they continue to face significant cost pressures, including higher energy bills and disruption linked to the conflict in Iran.

“Businesses cannot absorb these costs indefinitely, which risks pushing prices higher in the months ahead. To help protect households, government should take action to reduce business costs. Reducing the non-commodity charges, taxes and levies that make up more than two-thirds of energy bills, and cutting red tape would help keep inflation down.”

Furniture and health & beauty saw the sharpest increases, driven by rising raw material and shipping costs, she added.

Mike Watkins, NIQ head of retailer and business insight, said: “Food inflation is still around the same level as a year ago, helped by supermarkets maintaining promotions after Easter, but prices are now starting to creep up for non-food after a period of deflation.

“With external inflationary pressure building and many households cautious about spending, we can expect promotions across all of retail to increase over the summer months.”