Shop prices have yet to reach their peak – despite record highs seen in January, it has been warned.
Prices are now 8% higher than they were last January, up from 7.3% in December and above the three-month average of 7.5%, according to the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.
Overall food inflation rose to 13.8% from 13.3% in December – the highest inflation rate in the category on record.
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‘It’s bad news for the UK economy’
Inflation on fresh food has also reached a record high, due to increased food production costs, as well as elevated fruit and vegetable prices – which rose from 11% to 11.3% in December.
Ambient food inflation saw the fastest increase on record – from 11.3% from 11% in December – as wholesale and bulk prices rose, particularly for sugar and alcohol.
Meanwhile, clothing and footwear prices eased, which meant shoppers will have been able to restock their wardrobes during the January sales.
BRC chief executive Helen Dickinson said: “Retail prices rose in January as discounting slowed and retailers continued to face high input costs.
“With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing.
“However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak and will likely remain high in the near term as a result.”
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Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Consumer demand is likely to be weak in the first quarter due to the impact of energy price increases and, for many, Christmas spending bills starting to arrive.
“So the increase in food inflation is going to put further pressure on household budgets and it’s unlikely that there will be any improvement in the consumer mindset around personal finances in the near term.
“With shoppers having less money to spend on discretionary retail having paid for their essential groceries, there will be little to stimulate demand across the non-food channels.”