Food inflation has stabilised following sharp increases, as grocers gear up promotions.
According to the British Retail Consortium-Nielsen Shop Price Index report, food inflation fell to 4.5% in February, from 4.6%in January.
However, non-food inflation increased to 1.6% in February, from 1.3% in January. Overall shop price inflation increased to 2.7% in February from 2.5% in January.
Stephen Robertson, director general of the BRC, said: “Food inflation appears to have stabilised for now despite on-going pressure from soaring global commodity costs. The small fall compared with January shows retailers are doing everything they can to keep price rises to a minimum. This is demonstrated by the record proportion of groceries on promotion or discount, currently 39%.”
He said that January’s VAT rise is “starting to have an impact on non-food prices”, pushing up inflation. He said: “Even so, non-food inflation would be much higher if the full impact of the VAT rise had been passed on to customers. In fact, strong competition for business is still producing price falls in some areas, such as electricals and clothing.”
Mike Watkins, senior manager, retailer services, at Nielsen, who conducted the report, said: “With sales momentum slowing at the start of 2011, food retailers have had to maintain promotions and price cuts at the high levels we saw in December.”
He added: “And, whilst some of the increases in VAT have been absorbed by many retailers, the overall result is an increase in shop prices in non-food.”