Consumers should brace themselves for a prolonged dose of inflation, experts have warned, as the fallout from Iran war hits energy and transport costs.
The latest figures from the British Retail Consortium show that competition among supermarkets managed to keep food inflation at 2.7 per cent in May, lower than the three-month average of 3.1 per cent.
Last week, the Office for National Statistics also showed inflation fell to 2.8 per cent in April, from 3.3 per cent in March.
But that was also accompanied by warnings that the Middle East conflict will drive up prices. The BRC says furniture and health and beauty costs are already rising sharply driven by “rising raw materials and shipping costs”.
Helen Dickinson, chief executive of the BRC, said: “Customers were still able to find bargains, with prices for TVs and audiovisual equipment falling as retailers help people get World Cup ready.
“Households did benefit from food inflation falling to its lowest level in a year, as intense competition among supermarkets continued to deliver value and savings.”
But she added: “While retailers work hard to keep prices down for customers, they continue to face significant cost pressures, including higher energy bills and disruption linked to the conflict in Iran. Businesses cannot absorb these costs indefinitely, which risks pushing prices higher in the months ahead.”
She urged the government to introduce measures to reduce business costs and energy bills, while she said would help keep inflation down.
While City analysts expect supermarket promotions to remain strong over the summer, other research suggests that, once food prices go up during a crisis, they are slow to come down.
Analysis of 30 years of data by think tank the Energy Cost and Climate Intelligence Unit finds that shelf prices fall by only a third of the original increase two years after the crisis has ended.
Chris Jaccarini, food and farming analyst at the ECIU, said: “Shoppers feeling that prices are on a never-ending escalator upwards is borne out by the data.”
Henry Dimbleby, former lead of the government’s National Food Strategy, said: “Food inflation has been brutal – and it will keep biting unless we tackle the underlying causes. That’s because our food system is tightly tied to energy, fertiliser and transport costs – and we’ve built too little resilience into supply chains and production.”
