Supermarket Wars: Food Price Inflation Returns

Rises in the cost of bread and alcoholic drinks helped push overall food prices higher for the first time this year in July, according to a report by the retail industry.

The British Retail Consortium-Nielsen Shop Price Index said the cost of food rose by 0.1% last month, in what would be some welcome relief for supermarkets amid the sector's intense battle for market share that has seen prices - and profits - dip.

The BRC's director general sought to play down the return to rising prices.

Helen Dickinson said: "In the three months to July, food prices fell by 0.4% as the impact of past falls in oil but lower commodity prices and weaker demand in emerging markets helped support a continued deflationary environment.

"Annual food prices did rise very marginally this month, by just 0.1% year-on-year, this is a short-term blip in the longer term downward trend, reflecting the ongoing heightened levels of competition and it is not very significant."

Non-food price falls accelerated to an annual rate of 2.3% from 1.9% the previous month.

The BRC said that could be partly explained by lower high street prices.

Ms Dickinson added: "Clothing retailers were keen to shift their summer stock with widespread discounts clearly part of their strategy."

Furniture and flooring also saw a sharp acceleration in deflation as retailers "attempted to capitalise on stronger levels of demand in this category from renewed strength in the housing market," the report said.