UK shop price inflation climbed to 2.1 percent year on year in October, up from 1.4 percent in September, the British Retail Consortium said. The trade body described it as the highest reading in two and a half years.
Food inflation rose to 2.9 percent from 2.5 percent, while non-food inflation jumped to 1.7 percent from 0.8 percent. Retailers had largely held prices down through the year despite higher raw material costs, with weak customer demand limiting their ability to pass costs on. Heavy discounting ahead of Halloween was still evident, but supermarkets could no longer stop the price of tins and packets rising.
Retailers absorb less
Helen Dickinson, chief executive of the British Retail Consortium, said retailers had taken the strain for some time. “The dam is starting to break on the huge wave of costs retailers have absorbed over the last two years,” she said.
Rising energy and food ingredient costs have followed the conflict in the Middle East. Brent crude has reached $117 a barrel in recent days, against an average of around $70 a barrel in the months before the United States and Israel attacked Iran in February. Petrol prices in many places are above 1.75 pounds a litre, with diesel often above 2 pounds.
Budget and rate decisions loom
The figures land just before Chancellor John Healey’s first budget on Wednesday. The UK consumer prices index stood at 3.5 percent last month, and Bank of England officials are expected to raise the policy rate from 3.75 percent to 4 percent next week, a decision that rests with the bank’s nine-member monetary policy committee.
Research from Changing Realities, tracking 100 low-income families, found that 73 percent of project participants had shopped in a reduced-items aisle last month, while 63 percent left heating off even when cold. Ruth Patrick, professor at the University of Glasgow, said the budget was a chance to deliver on a promise made by Andy Burnham. “The budget provides an opportunity to make good on Andy Burnham’s pledge that his will be a ‘cost of living government’,” she said.
Source: British Retail Consortium | Data: FRED — St. Louis Fed
