UK Economy
Overall UK shop price inflation increased to 2.9% in June from 2.3% in May
By Finfacts Team
Jul 6, 2011 - 11:21 AM

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Overall UK shop price inflation increased to 2.9% in June from 2.3% in May. Food inflation accelerated to 5.7% in June from 4.9% in May. Non-food inflation rose to 1.3% in June from 0.8% in May.

Stephen Robertson, British Retail Consortium director general, said today: "Household budgets are under pressure. Real disposable incomes have dropped the most in 34 years but increasing petrol and energy bills plus low wage rises are the main causes.  

"Shop prices are going up much more slowly than the wider Consumer Prices Index. Overall shop price inflation is being driven by surging world commodity prices, the effect of the weak pound on import costs and higher VAT – all beyond retailers' control.

"Headline food inflation is up, but 39 per cent of grocery spending is going on promoted goods, showing there are lots of offers available and savvy shoppers are taking advantage to minimise the impact on real-life bills. Considering January's VAT rise, non-food inflation is still very low.

"The latest bout of retail administrations shows how weak consumer spending is. Retailers are using discounts to generate sales at the expense of margins. Sales have started earlier this year, especially in clothing and footwear, where prices are actually cheaper than a year ago."

Mike Watkins, senior manager, Retailer Services, Nielsen comments: "Shop price inflation remains below consumer price inflation with the continued increase in the price of food being driven by wider economic conditions such as global commodity prices and weather related supply changes.

Retailers have responded by maintaining the historically high level of promotions which is helping shoppers to cope with falling household income. With shoppers indicating that they are becoming even more cautious about spending, this will impact discretionary spend further so all retailers will have to keep a focus on managing any cost price increases over the next six months."

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