Shop price inflation rose to 2.9 per cent in June from 2.3 per cent in May, while food inflation also increased, driven by wider economic conditions, says the British Retail Consortium.

Shop price inflation rose to 2.9 per cent in June from 2.3 per cent in May, while food inflation also increased, driven by wider economic conditions, says the British Retail Consortium (BRC).

Food inflation increased to 5.7 per cent last month, up from 4.9 per cent in May, according to the BRC-Nielsen Shop Price Index June 2011.

Stephen Robertson, director general of the BRC, cites the decline in disposable incomes and soaring petrol and energy bills as the main causes of the inflation rises.

However, he points out that shop prices are going up more slowly than the wider Consumer Prices Index.

‘Overall shop price inflation is being driven by surging world commodity prices, the effect of the weak pound on import costs and higher VAT – all beyond retailers’ control,’ he explains.

‘Headline food inflation is up but 39 per cent of grocery spending is on promoted goods, showing there are lots of offers available and savvy shoppers are taking advantage to minimise the impact on real-life bills.’

Robertson adds that non-food inflation has remained low, rising to 1.3 per cent in June, from 0.8 per cent in May, despite the VAT rise in January this year, but warns that, ‘the latest bout of retail administrations shows how weak consumer spending is’.

Mike Watkins, senior manager of retailer services at consumer insights company Nielsen, comments, ‘Retailers have responded by maintaining the historically high level of promotions which is helping shoppers to cope with falling household income.’