Shop price inflation rose to 1.5% in March from February’s two-year low of 1.2% as food inflation shot up in the month, according to the British Retail Consortium (BRC)-Nielsen Shop Price Index.
The gap between food and non-food has widened as food price inflation increased to 5.4% in March from 4.2% in February.
The index reported a deflation in non-food of 0.9% in March, which is the fastest fall for over two years.
As the price of oil has accelerated, so have transport and manufacturing costs, which has in turn driven up food inflation.
BRC director general Stephen Robertson said: “Retailers are shifting away from multi-buy reductions on specific items in favour of money-off coupons for an entire shop, giving customers more flexibility and producing savings on food shopping which don’t show up in this index.”
He explained this quirk to the figures shows shop price inflation to have edged up but is below the official 3.4% consumer prices figure.
Both ambient and fresh food inflation increased “significantly” as both categories posted an eight and nine month high respectively.
Non-food continued to deflate, as clothing and footwear posted a 5.2% deflationary average over the past three months due to a sharp fall in cotton prices, which are down 55% year on year.
Electricals averaged 4.5% deflationary average over the past three months which BRC-Nielsen believes is due to customers moving online as they seek better deals.
The BRC-Nielsen believe shop price inflation is set to rise as the Chancellor announced measures in the Budget which will push CPI and RPI up by 0.38 and 0.41 percentage points respectively.
The 20% VAT rate on food sold above “ambient temperature”, which is to come into force on October 1 is expected to add 0.03 percentage points to CPI according to the Office for National Statistics but BRC-Nielsen calculate the effect on food inflation “will be much more significant”.
Nielsen senior manager of retailer services Mike Watkins added: “With inflationary pressure continuing in the food supply chain we can expect supermarkets to keep a strong focus on promotional activity over the next few months. Shoppers are following the deals and will continue to seek out the best value for money.”