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Food inflation reaches highest level for two years

Food inflation reaches highest level for two years

Food inflation has hit a two-year high which, coupled with a 20% increase in energy costs, suggests hospitality operators should brace themselves for further belt-tightening.

The British Retail Consortium (BRC) released new figures today that indicate food inflation has reached 4.9% for May, up from 4.7% for April.

The recent volatility in key commodities prices was blamed on increased demand in the developing world, particularly China, as well as dry weather, which has affected harvest yields.

Stephen Robertson, BRC director general, said: "Wheat is up 72% and oil 50% on a year ago, while rising gas and electricity prices are pushing up costs at every stage of the supply chain."

The data released by BRC and Nielsen show that overall shop price inflation slowed to 2.3% in May from 2.5% the previous month, while non-food inflation also slowed to 0.8% from 1.2% in April.

The gloomy news comes hot on the heels of an announcement by Scottish Power yesterday that gas and electricity prices are due to increase from August by 19% and 10% respectively.

Mike Watkins, senior manager of retailer services at Nielsen, said that inflation and other rising household bills were still a priority for consumers but warned against the prolonged use of promotions and price cuts.

He said: "This continues to be an important driver of sales for retailers and a coping strategy for shoppers but should not be seen as the long-term answer to any weakening of consumer demand or falls in consumer confidence."

Oxfam predicts food prices will double by 2020 >>

Help for those dealing with rising food costs >>

Cost of eating out rising faster than inflation according to survey >>

By Janie Stamford

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