Food prices rising
Rising food prices are fuelling shop price inflation
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Wednesday, 05, Dec 2007 12:48
The rate of shop price rises remained at a year-high in November, driven by rising food inflation, according to new figures.
Retail prices were 1.1 per cent higher year-on-year last month and up by 0.5 per cent from October, the British Retail Consortium (BRC) revealed.
The trade association said inflationary cost pressures in the food sector were continuing to feed through to overall retail prices.
Annual food price inflation reached 4.3 per cent in November, up from 3.7 per cent in October and representing the largest year-on-year increase since December 2006, according to the BRC's latest shop price index.
However the organisation stressed falling prices within non-foods were continuing to keep overall shop price inflation down and well below the Bank of England's overall inflation target of two per cent.
Declines in the price of clothing and footwear, electricals and health and beauty drove price drops in non-food last month.
The BRC said while food inflation was likely to remain high in the coming months, expected rises were set to be outweighed by a sustained period of discounting in the non-food sector in the run-up to Christmas and ahead of an anticipated slowdown in consumer spending.
Despite shop price inflation rising, the BRC is therefore pressing the Bank of England to give a boost to the sector tomorrow by cutting the UK's benchmark interest rate from its current level of 5.75 per cent.
"While commodity inflation is still driving up food prices, which grocers are doing their best to not pass onto the consumer, overall shop price inflation is low and going a long way to ensure the Bank meets its two per cent target," said BRC director general Kevin Hawkins.
"With a severe slow-down in consumer spending likely after Christmas, the next interest rate move should be a cut," he stressed.
The call for a rate cut comes amid increasing concern about the health of the UK's retail sector, with consumer spending one of the main drivers of economic growth.
Separate figures released by the BRC earlier this week showed a slight improvement in high street sales in November, but research released today by lender Nationwide claimed consumer confidence fell at the fastest rate in more than three years last month - amid fears about the state of the economy and uncertainty over the ongoing global credit crunch.