Prices to surge in 2022 as retailers struggle to absorb cost pressures

Shop prices rose year on year for the second consecutive month in December, as inflation accelerated to 0.8%, according to the BRC-NielsenIQ Shop Price Index.

That compared with a 0.3% uplift in November, which marked the first month that retail prices had risen since May 2019.

Consumers felt the pinch mostly in food, with grocery prices spiking 2.4% in December, following a 1.1% increase the previous month.

The steepest increases were felt in fresh food, which rose in price by 3% during December compared with the same month in 2020. It marked the sharpest rate of inflation in fresh food for almost 10 years.

The BRC data came as The Times’ annual survey of economists warned that inflation could surpass 7% in 2022 to reach levels not seen in the UK since the 1990s.

More than a third of the 32 economists polled expect inflation to peak between 6 and 6.5% this year, while 15% predict it will surpass 6.5%. Two economists, including a former bank rate-setter, said inflation would top 7%.

BRC chief executive Helen Dickinson warned that prices “will continue to rise, and at a faster rate” during 2022. She called on the government to do more to tackle “resolvable issues” such as labour shortages.

Dickinson said: “The trajectory for consumer prices is very clear: they will continue to rise, and at a faster rate. Retailers can no longer absorb all the cost pressures arising from more expensive transportation, labour shortages, and rising commodity and global food prices.

“Consumers will already be harder pressed this year, with rising energy bills, the looming hike in national insurance and more expensive mortgages.

“Government should relieve some of these costs by looking for long-term solutions for resolvable issues such as labour shortages.”