–UK BRC May Shop Prices Up 1.8% y/y vs Up 2.0% y/y Apr
–UK BRC May Shop Prices +0.3% m/m Vs Same Rate m/m in Apr
–UK BRC May Food Prices +2.2% y/y; Non-Food +1.6% y/y

LONDON (MNI) – UK shop price inflation eased slightly in the
month of May despite rising costs, according to the British Retail
Consortium-Nielsen Shop Price Index (SPI).

The BRC shop price index rose 1.8% year-on-year in May, compared
with a 2.0% rate in April.

Month-on-month, shop prices rose 0.3%, the same rate of increase as
in April.

Non-food inflation also decelerated in May to 1.6% from 2.0%
annually, despite seeing some large increases in costs, namely a 40%
increase in cotton prices. Non-food inflation rose 0.2% month on month
in May, the same rate of increase as in April.

Food was the only component to show accelerating inflation, which
came in at 2.2% year-on-year in May from 2.0% in April. In monthly
terms food inflation rose 0.4%. Ambient food inflation drove the overall
category higher, increasing sharply from 3.3% to 4.4% in May, its
highest since January, due in part to price rises for alcoholic
beverages. Monthly ambient food inflation increased 1.6% in May.

The BRC said that upward inflationary pressures came from a variety
of sources. However, the three main sources continue to be the VAT
increase in January 2010, the past depreciation of sterling and
rising commodity prices, especially oil and petrol which directly
impact transport costs.

If the VAT rate remains the same after the June 22 Budget,
BRC-Nielsen predicts shop price inflation will “remain fairly stable for
the remainder of the year,” but the BRC said that this would be subject
to stability in supply and the forex markets, they said.

The BRC blamed the rise in food inflation on a jump in the
inflation rate of alcoholic beverages and in the category containing
sugar, jam and chocolate. The BRC also predicts inflation to slow in the
coming months as some recent falls in commodity prices begin to filter

Fresh food prices for the year slowed to 0.7% in May, down from
1.2% in April, and decreased 0.3% monthly. The BRC said downward
pressure continued from the sub-category containing milk, cheese and
eggs. Also, annual deflation was seen from fish and vegetables.

Stephen Robertson, British Retail Consortium Director General,

“In May, overall shop price inflation slowed compared with the
previous month, despite big rises in some costs. Past rises in the price
of oil continue to put pressure on transport costs. International
shipping prices are up over a third. Cotton prices are up 40%. But
clothes and electricals are cheaper than they were last year, as
retailers hold prices down in the face of customers’ reluctance to
spend. With margins already being squeezed, a VAT increase would be an
inflationary pressure too far.

“Food inflation was up slightly, but that should ease. Tinned and
packet foods were the main cause because recent falls in commodities,
such as wheat and coffee, have yet to work through to shop prices,”
Robertson added.

–London newsroom: 4420 7862 7491; email: ukeditorial@marketnews.com

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