Shop Price Inflation Hits 32-Month Peak

A sharp rise in the cost of food has seen shop price inflation leap to its highest rate since October 2008, according to the British Retail Consortium.

The new research suggests higher petrol and commodity prices lifted the rate to 2.9% in June from 2.3% in May.

Food inflation rose to 5.7% from 4.9% - the biggest rise since May 2009 - while non-food inflation rose to 1.3% from 0.8%.

"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," said BRC director-general Stephen Robertson.

The BRC predicted that there would be further upward price pressure, especially on the cost of non-chilled goods, due to higher grain prices and second-round effects from wage rises in commodity-exporting countries.

Some 39% of grocery spending is now on goods on promotion, which shows "there are lots of offers available" and "savvy shoppers are taking advantage to minimise the impact on real-life bills".

A number of retailers - including Marks & Spencer - have started sales two weeks earlier than 2010, with the result that some products, such as clothing and footwear, are now cheaper than a year ago.

A number of high-profile chains have gone into administration, inclusing Focus, Habitat, Jane Norman and T.J. Hughes , a trend which the BRC said reflects the weakness in consumer spending and the growing use of discounts to generate sales at the expense of revenues.