Food inflation 'hits three-year high' on weak pound
Food prices climbed at their fastest rate for more than three years in May as the weak pound pushed up import prices, new research shows.
The British Retail Consortium measured the prices of 500 everyday goods and found food inflation was 1.4% during the month, up from 0.9% in April. But it said overall inflation including non-food items had fallen. It comes as another study found a surprise pick-up in consumer confidence despite a predicted pre-election slump. According to the BRC, processed food prices showed the steepest rise in May, at 1.8%, up from 0.8% in April, while fresh food inflation was 1.2%, up from 1%. It blamed the pound, which has fallen about 16% since the Brexit vote last June, increasing costs for businesses that import goods into the UK. BRC chief executive Helen Dickinson said: "With shorter stock turnaround times, the impact of the weaker pound has already started feeding through into food prices, although food price inflation this month is still well below the input cost price increases being faced by retailers." Despite the rising food prices, overall inflation fell, with the prices of non-food items 1.5% lower than a year ago. BRC credited heavy discounting in the wake of a "weak start to the year" and the fact that some businesses are still protected against currency shifts by hedging contracts. Meanwhile, a separate study from GfK found consumer confidence increased in May, with the market research firm's Consumer Confidence Index increasing two points to minus five. This was despite inflation squeezing household spending and wages rising at a slower pace than inflation for the first time in two and a half years. Joe Staton, head of market dynamics at GfK, said: "We have an unexpected uptick in the barometer this month as consumers report increased confidence in their personal financial situation, the wider economy, and future plans for shopping and saving." He added: "Although the overall index score is bumping along in negative territory, we haven't seen any significant fall of the kind we might expect during such periods of pre-election and pre-Brexit uncertainty." It follows the most recent Office for National Statistics retail figures showing sales outstripping expectations to rise by 2.3% in April compared with March.