Food price inflation continued to stabilise in November 2009 – edging up to 2.8% from 2.5% in the previous two months.
According to the BRC-Nielsen Shop Price Index Overall shop price inflation rose marginally in November to 0.2%.
Stephen Robertson, British Retail Consortium (BRC) director general, said:
“Overall shop prices are virtually the same as last year. Food inflation has plunged by over two-thirds from its peak in August 2008. Into 2010, we expect food inflation to be far more stable than over the last 18 months.
“In the run up to Christmas, it’s clear fierce retail competition is keeping shop prices down as stores fight it out with more discounts and promotions than last year.
“Low shop prices are contributing to reviving consumer confidence. Something the chancellor should remember if he is considering piling new costs onto retailers in the pre-Budget Report. That would only fuel inflation.”
Mike Watkins, Senior Manager, Retailer Services, Nielsen comments:
“Shop price inflation is now stable but shoppers continue to be cautious about spending. As a result we are seeing more price cuts, deeper promotions and increased benefits from loyalty schemes in particular by the major food retailers. Christmas is a battle for shopper loyalty.”
Overall food inflation was driven by an acceleration in fresh food rising to 2.6% in November from 1.3% in October. This inflationary pressure was partially offset by slowing ambient food inflation, which fell to its lowest level since December 2007.
While it has increased fresh food inflation is around a quarter of its year high in February. This increase can partly be attributed to the upward movement in commodity prices in recent months.
The Thomson Reuters/Jefferies CRB index, which tracks the movement of a basket of food commodities, has increased 12.4% on a year-on-year basis. The price of Brent crude oil is up 45% on a year ago and up nearly 70% since January.
Other commodities such as corn, wheat, cocoa and white sugar have increased 32%, 22%, 36% and 100% respectively, on an annual basis. There is a longer lag between commodity price movements and the price of ambient food products, compared with fresh food, as manufacturers often hedge up to a year ahead.
The output Producer Price Index for food and beverages, an indication of inflationary pressures faced by grocery suppliers, increased for the third consecutive month in October, suggesting further upward pressures could be in the pipeline.
