Shop price inflation has risen to the highest level in two and a half years, according to the British Retail Consortium, which warned that “the dam is starting to break” when it comes to retailers trying to limit price rises for customers.
The lobby group said shop price inflation was ۲.۱% year on year in October, a sharp rise compared with ۱.۴% in September, and an indication that retailers were beginning to pass on the rising costs of energy and food ingredients since the Middle East conflict broke out.
It said food inflation, which has remained low during the past year, increased this month to ۲.۹% year on year – against a ۲.۵% rise in September – putting further pressure on the chancellor, John Healey, before his first budget on Wednesday.
Non-food inflation, which includes items such as clothing and footwear, more than doubled in October, from ۰.۸% to ۱.۷% year on year.
The price of Brent crude oil reached $۱۱۷ a barrel in recent days, well above the $۷۰ average in the months before the US and Israel attacked Iran in February. Gas prices have also risen sharply, pushing the UK consumer prices index to ۳.۵% last month.
Until this month, retailers had largely absorbed the higher costs of raw materials, mainly in response to weak demand from customers. In surveys, consumer confidence has declined sharply since the summer, when it became clearer the conflict in the Middle East was unlikely to end swiftly.
Bank of England officials are expected to raise interest rates next week from ۳.۷۵% to ۴%. If the rise in retail prices persists, it is likely to persuade many of the Bank’s nine-member monetary policy committee to raise rates still further in December or the new year.
Helen Dickinson, the chief executive of the BRC, said: “The dam is starting to break on the huge wave of costs retailers have absorbed over the last two years.”
She said that while there was heavy discounting to attract shoppers ahead of Halloween celebrations, supermarkets could no longer keep the prices of tins and packets on their shelves from going up.
The chancellor is expected to come under intense pressure from his own backbenchers concerned that the high cost of living is harming many of their constituents.
The impact of cost of living pressures on low-income families is the subject of a report by Ruth Patrick, a professor in social and public policy at the University of Glasgow.
Based on a long-term study, it shows that high petrol and diesel prices are hitting families who need to transport disabled children to and from school and health appointments, and workers who use a car to travel to and from their jobs.
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Petrol prices above £۱.۷۵ a litre in many places and diesel often above £۲ a litre can mean that work doesn’t pay, according to Patrick, who leads Changing Realities, an online project tracking ۱۰۰ low-income families.
She said that in the last month almost three-quarters (۷۳%) of participants in the project had shopped in the reduced-items aisle, while ۶۲% had changed the food they buy and ۶۳% had left the heating off even when cold.
One respondent, Rosie L, who lives in rural Scotland, said: “It’s getting to a point where I don’t know how we are going to keep managing to run our car.” She added: “Public transport is not accessible or reliable where we are [and] not having access to a car would affect every single aspect of our lives. Particularly as my children are disabled.”
The report involves in-depth interviews with ۷۰ participants, of which ۶۷ shared strategies they had taken to reduce costs over the previous month.
Patrick said the help provided by governments and local authorities so far did not match the scale of the problem. “The budget provides an opportunity to make good on Andy Burnham’s pledge that his will be a ‘cost of living government’,” she argued.
“Taking sustainable and long-term steps to secure the adequacy of social security would be a vital step here, and there is particular scope in restoring the real value of child benefit, traditionally a vital source of support with the additional costs that come with children.”
