UK shop price inflation accelerated to 1.5% in August, its highest level in more than two years, as both food and non-food prices increased ahead of the autumn trading period.

The annual rate rose from 0.9% in July and was above the three-month average of 1.2%, according to the latest BRC-NIQ Shop Price Monitor. The August rate was the highest since February 2024.

Food inflation remained higher than non-food inflation, but both categories recorded faster price growth. The figures add to the pricing pressures facing retailers as consumers continue to focus on value.

Ambient food drives grocery inflation

Food inflation rose to 2.8% in August from 2.2% in July, above its three-month average of 2.5%.

The sharpest acceleration came from ambient food, which includes longer-life products such as packaged and processed goods. Inflation in the category more than doubled from 1.1% in July to 2.5%, above its three-month average of 1.8%.

Helen Dickinson, chief executive of the British Retail Consortium (BRC), said higher energy, input and commodity costs were beginning to feed through into retail prices.

“The impact of higher energy, input and commodity costs is beginning to filter through into prices,” Dickinson said, particularly for ambient foods, which are often imported and processed.

Fresh food inflation moved in the opposite direction, easing slightly to 3% from 3.1% in July. It remained in line with its three-month average.

Fresh food therefore continued to have the higher inflation rate, but the sharpest acceleration in August came from ambient food.

Non-food prices accelerate

Price pressures also increased outside grocery.

Non-food inflation rose to 0.9% in August from 0.2% in July, moving above its three-month average of 0.6%.

Electrical goods were among the categories affected. The BRC linked higher prices in the category to increased demand for memory chips and storage associated with artificial intelligence.

Dickinson said electrical prices had risen amid the “ongoing AI boom”, which was pushing up the cost of memory chips and storage.

Higher component costs are relevant to retailers selling consumer electronics, where memory and storage are used in products such as smartphones, computers and other devices.

Clothing provided some relief for shoppers. The BRC said retailers kept clothing prices low during the back-to-school period as they sought to offer value to families.

Retailers face tougher pricing choices

The latest figures highlight the challenge for retailers of managing higher costs while keeping prices competitive.

Mike Watkins, head of retailer and business insight at NIQ, said the increase in food and non-food inflation was partly expected as some summer promotional activity came to an end.

Retailers were continuing to keep prices low to help consumers manage household costs, Watkins said. But supply-chain pressures were building and price competition was likely to intensify during the autumn.

Retailers are also dealing with persistently high operating costs. Dickinson said these were limiting their ability to absorb further increases without affecting “investment, jobs and prices”.

The rise in shop price inflation comes against a broader increase in UK consumer inflation. The Consumer Prices Index (CPI) rose by 2.9% in the 12 months to July, up from 2.6% in June, according to the Office for National Statistics.

Shop price inflation in August therefore remained below the latest headline CPI rate, although the two measures cover different baskets of goods and are calculated using different methodologies.

The latest increase comes as retailers move through the autumn and towards the Christmas trading period, when competition for consumer spending becomes particularly important.

For grocers, higher ambient food inflation adds pressure to pricing decisions across packaged and processed products. Electrical retailers face a separate challenge from rising memory and storage costs.

With both food and non-food inflation accelerating, retailers face a more difficult balance between absorbing higher costs and maintaining competitive prices as the peak trading season approaches.