Food inflation is continuing to climb, hitting 4% year on year in July, as retail grapples with the £7bn cost of last year’s budget.
Food inflation has climbed from 3.7% year on year in June, with staples such as meat and tea among hardest-hit categories amid tighter global supplies, according to the latest BRC-NIQ Shop Price Monitor.
Ambient food is also seeing sharper price increases, with inflation in the category reaching 5.1% in July, compared with 4.3% in June.
There was less pressure in fresh food, where inflation was 3.2% in July, the same as the June rate, though still above the three-month average of 2.9%.
For the second month in a row, the pressure in food led to inflation in overall shop prices, despite deflation in non-food. Overall shop price inflation was 0.7% year on year in July, having been 0.4% in June and –0.1% May.
However, non-food prices are also edging closer to inflation. They were down by 1% year on year in July, compared with a 1.2% year on year fall in June and 1.5% deflation in May.
BRC CEO Helen Dickinson urged the government to “think carefully” about the next budget, in which Chancellor Rachel Reeves is due to announce an increase in business rates that will impact larger stores from April 2026. It threatens to heap yet more costs on a sector already trying to protect consumers from the impact of rises in employers’ National Insurance payments announced in last year’s budget.
“Retailers are doing everything possible to protect their customers from the worst of the inflationary pressures, but the £7bn cost to retail of last year’s budget forced most retailers to raise prices,” said Dickinson.
“Further tax rises will ultimately hurt households, locking in inflation and forcing people to pay higher prices to put food on the table.”
NIQ head of retailer and business insight Mike Watkins said consumers could still save money on groceries by shopping around.
“Consumers’ household budgets are coming under pressure with the food retailers now seeing price increases above CPI,” he said.
“However, price competition helped by promotional activity will still mean that shoppers can save money by shopping around.
“With inflation on the up, high street retailers will also be concerned about customer retention over the summer holiday season if they are to maintain sales momentum.”
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