Shop price inflation slows on cheaper food - BRC

Prices on the high street were still up 2.4 per cent from a year ago, but inflation eased from February’s 27-month high of 2.7 per cent, the British Retail Consortium (BRC) said.

Food prices were 0.5 per cent lower compared with February, taking the annual rise in food prices to 4 per cent in March, the BRC said.

“With the backdrop of falling consumer sentiment, rising fuel bills and the prospect of public sector cuts, retailers are using unprecedented levels of promotions and discounts to drive sales, which have reduced the growing burden on consumer budgets,” the BRC said.

Shop price inflation remains well below official consumer price inflation, which hit its highest level in nearly 2-1/2 years in February at 4.4 per cent - more than double the Bank of England’s target.

The Bank is under pressure to tackle soaring prices with a first post-financial crisis interest rate increase.

But a majority of its policymakers have been worrying more about the health of the economy, with severe cuts in public spending about to take effect, and the Bank is seen holding rates at 0.5 per cent on Thursday.

The Bank hopes inflation will fall back to target over the course of the next two years but is concerned that price pressures may become embedded.

The BRC said the relatively low rate of shop price inflation in the non-food sector, at 1.5 per cent, showed retailers were still absorbing much of January’s 2.5 percentage point rise in value-added tax.