UK food inflation increased for the fourth consecutive month in May, reaching an annual rate of 2.8%, according to the latest British Retail Consortium (BRC) and NielsenIQ Shop Price Index.
This marks the highest level in nearly a year, driven primarily by rising fresh food prices and escalating operational costs for retailers.
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Fresh food prices drive inflation surge
Fresh food inflation rose to 2.4% year-on-year in May, up from 1.8% in April.
The increase is largely attributed to higher wholesale beef prices, influenced by supply shortages and strong international demand, particularly from China.
In contrast, ambient food inflation, which includes shelf-stable items, eased slightly to 3.3% from 3.7% the previous month.
Non-food prices continue to decline
Non-food items remained in deflation, with prices falling by 1.5% year-on-year in May, compared to a 1.4% decline in April.
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By GlobalDataHowever, the rate of deflation has slowed in categories such as fashion and furniture, as retailers begin to reduce heavy promotional activities.
Electrical goods experienced faster price declines, as retailers aimed to stimulate spending ahead of potential impacts from U.S. tariffs.
Retailers face increasing cost pressures
Retailers are contending with significant cost increases, including an additional £5 billion from April’s higher employer National Insurance contributions and National Living Wage adjustments.
Further financial pressures are anticipated later this year, with a £2 billion packaging tax and additional employment costs associated with the forthcoming Employment Rights Bill.
These mounting expenses may lead to further price increases for consumers in the coming months.
The overall shop price index remained in deflation at -0.1% year-on-year in May, unchanged from April, and above the three-month average of -0.2%.
Despite this, the persistent rise in food inflation highlights the ongoing challenges faced by both retailers and consumers amid a complex economic landscape.
