Shop price inflation accelerated to its highest level in more than two years in August as rising energy, commodity and operating costs began to feed through to consumers.
The latest BRC-NIQ Shop Price Index showed prices were 1.5 per cent higher year on year in August, up from 0.9 per cent in July and above the three-month average of 1.2 per cent.
Non-food inflation also climbed sharply, rising from 0.2 per cent in July to 0.9 per cent in August, while food inflation increased from 2.2 per cent to 2.8 per cent.
The British Retail Consortium (BRC) said electrical products were among the categories experiencing higher prices, with the ongoing growth in artificial intelligence contributing to increased demand – and costs – for memory chips and storage.
Helen Dickinson, Chief Executive of the BRC, said: “Shop price inflation rose to its highest level in over two years, albeit well below the headline Consumer Price Index.
“The impact of higher energy, input and commodity costs is beginning to filter through into prices.”
Despite rising prices elsewhere, clothing retailers continued to discount products as families prepared for the new school year.
The figures follow a period in which retailers have used summer promotions to keep prices down. In July, overall shop price inflation had eased to 0.9 per cent, while non-food inflation stood at just 0.2 per cent.
Dickinson warned that retailers’ ability to continue absorbing higher costs was becoming increasingly limited.
“The months ahead look challenging for households, with rising bills putting further pressure on budgets,” she said.
“Retailers are facing persistently high operating costs, limiting their ability to absorb further increases without impacting investment, jobs and prices.”
The BRC called on the Government to address costs facing businesses, highlighting business rates, packaging and employment taxes as particular areas of concern.
Mike Watkins, head of retailer and business insight at NIQ, said the increase was partly expected as summer promotional activity came to an end.
“Pressures are continuing to build across supply chains, and we can expect price competition to intensify as we move into the autumn months,” he added.
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