Food price inflation flat as it 'bottoms out'

Shop price inflation rose to 1.1% and food price inflation was unchanged at 3.1%. Deflation in non-food slowed to 0.1% from 0.3% in July.

The BRC said food inflation appears to be “bottoming out”, having fallen from 5.4% five months earlier. Ambient food prices increased to 4% in August, offsetting another fall in fresh food inflation to 2.5% from 2.8% in July.

BRC director general Stephen Robertson said: “For all the talk of food prices erupting, August’s food inflation was no higher than the previous month’s two-year low of 3.1%.

“The price of products such as bread and pasta is already rising more quickly as increasing wheat costs from poor harvests in the US filter through. We are likely to see more of that effect, not less, in future months.”

Consumer confidence according to market research firm GfK stayed low at -29 in August, the fourth consecutive month it has remained at this level.

With rising cost pressures and weak consumer sentiment the BRC believes retailers will be “faced with some tough decisions” across the coming months.

Nielsen senior manager for retailer services Mike Watkins said:”Despite lower inflation in food, slight deflation in non-food and after one of the most intense periods of vouchering from supermarkets during the summer, retailers will now need to focus on limiting any price increases for the rest of the year, as underlying demand is still weak.”  Non-food goods are cheaper than they were a year ago for the seventh month in a row, as retailers continue to cut prices. Prices in clothing and footwear fell faster in August, falling to 4.5% from 3.9% in July driven by womenswear and kids’ fashion. Babywear was the only category to report annual inflation.

Deflation in electricals accelerated to 3.3% from 3.1% in July as prices across audio equipment fell.

Furniture and floor coverings returned to inflation in August, hitting 1.1%.