Responding to the latest CPI inflation figures, which show headline inflation rising to 3.4% and food inflation rising to 4.5%, Harvir Dhillon, Economist at the British Retail Consortium, said:
Headline inflation took an unwelcome rise at the end of year, primarily driven by increases in food inflation and transport costs. Across retail, there was a mixed picture for shoppers. The slowdown in the housing market led to more extensive promotional activity in furniture and household equipment, which pushed prices deeper into deflation. However, with food inflation climbing to 4.5% and wage growth slowing, households are still feeling the squeeze. There was some respite for shoppers with the price of some breakfast items such as yoghurt, jam and honey falling on the month.
Headline inflation has been slow to fall from its summer peak and remains higher than at the start of the year. Within retail, this reflects the high costs currently buffeting businesses, including NI, labour costs, and packaging taxes, all of which have pushed up costs. Government must not be complacent about inflation; if incoming regulations, such as the Employment Rights Act, increase costs further, this will be felt by consumers – not only in higher prices, but from the knock-on impact to jobs, which have already fallen significantly over the past year.
