August 4, 2010 / 6:42 AM / in 9 years

Shop price inflation sticks at 1.5 percent

LONDON (Reuters) - Shop price inflation held steady in July as upward pressure from the cost of fresh food was offset by falls in furniture, clothing and electrical goods prices, a survey showed on Wednesday.

The British Retail Consortium said shop prices were 1.5 percent higher in July than a year ago — the same rate seen in June. Shop price inflation has levelled out after two months of easing.

“Shop price inflation remains below consumer price inflation and the moderate increases in the price of food in July are being driven by wider economic conditions and seasonal supply changes,” said Mike Watkins at Retailer Services, Nielsen.

The BRC — an umbrella group for retailers in the UK — flagged up a spike in wheat prices as an upside risk and a worry that above-target headline inflation may become entrenched, but said it expected shop price inflation to remain subdued for now.

Consumer price inflation — which the Bank of England targets at 2 percent — has been above target since December, but eased to 3.2 percent in June.

BoE policymakers expect inflation to fall back to target over the coming months, although one Monetary Policy Committee member — Andrew Sentance — has voted for interest rates to rise gradually from a record low of 0.5 percent.

“It’s clear the high street is the not the main source of inflation,” said Stephen Robertson, BRC director general.

The BRC said food price inflation picked up to an annual rate of 2.5 percent in July from 1.7 percent in June, due to higher animal feed and wheat costs, and strong rises in the price of other commodities such as palm oil, cocoa and soya oil.

But non-food price inflation eased to 1.0 percent in July from 1.4 percent in June, with prices falling in four sectors — clothing and footwear, furniture and floor covering, electrical goods and books, stationery and home entertainment.

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