Shop prices rise in December

The passing of the first anniversary of the 15% VAT rate, effectively cutting its downward effect on inflation, was blamed for much of the rise. Both food and non-food rose, to 3.7% and 1.4% respectively, making the month the first for non-food inflation since December 2008.

In food, fresh food inflation remained unchanged, at 2.6%, but ambient food accelerated to 5.4% from November’s 3.2%. For non-food, the bulk of the increases came from the DIY, gardening and health and beauty categories, all of which reported their highest rates of inflation since the index began.

BRC director general Stephen Robertson said:  “With December being the first and only month where the 15% VAT rate was the same as a year earlier, a shop price inflation rise was inevitable.”

He added: “VAT isn’t the only issue though. Increases in the costs of oil, food commodities such as wheat and sugar and the continued weakness of the pound are also filtering through.”  

The BRC said the return to a 17.5% VAT rate on January 1 would mean further upward pressure on inflation as comparisons are made against the lower rate of the corresponding period in 2009. 

Mike Watkins, senior manager, retailer services at Nielsen, commented: “Prices fell in December 2008 as the result of the VAT reduction and, at the height of the shoppers recession, discounting in non-food was also significant. So against these comparatives, the increase in shop prices this December is no surprise.”