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Finance

Food price inflation hits 4.7 per cent in April

07/05/2008

Food prices are still rising and increased 4.7 per cent in April, driven by high wholesale costs.

However, shop prices as a whole only rose 1.2 per cent as non-food prices fell over the month.

Figures from the British Retail Consortium (BRC) find the rise in the price of food commodities continues to be the main driver of inflationary pressure within the sector.

The use of price controls and export restrictions imposed by countries including China, Egypt and India has exacerbated this problem, the BRC added.

However, there are some signs restrictions are now easing with wheat prices this month falling to a six month-low after the Ukraine, one the world's largest exporters of grain, cut back its restrictions on exports, the BRC said.

A rise in the alcohol duty, brought in by the Budget earlier this year, also contributed to the rise, as spirits and liqueurs increased seven per cent.

BRC director Stephen Robertson said: "Food prices have gone up, but the retail price of food is rising much more slowly than the farmgate price of commodities such as wheat and milk.

"Retailers are succeeding at protecting customers from the full force of increasing commodity, energy and transport costs by absorbing most of those increases themselves, even when it's at the expense of their own margins."

In contrast, the non-food sector experienced deflation of 0.6 per cent compared with this time last year.

Electrical, clothing and footwear helped drive down overall prices, with a 0.2 per cent drop in April compared to March attributed to declines in furniture, floorcoverings and books, stationery and home entertainment.

The GfK consumer confidence measure recently fell to a 15-year low and retailers continued to use discounting on a vast range of products in an attempt to boost sales as consumers become increasingly sensitive to price changes and continue to rein in spending, the BRC said.