Supermarkets are “shielding” shoppers from cost increases as food prices rise

Food prices are on the rise but competitive supermarkets are keeping prises low for consumers, new f

Food prices are on the rise but competitive supermarkets are keeping prises low for consumers, new figures show. Picture: Ian Burt - Credit: Ian Burt

Competition between supermarkets is shielding customers from higher rises in food costs, figures show.

Shop prices are 1% lower than in February 2016 despite food showing inflation of 0.4% last month, the BRC-Nielsen Shop Price Index shows.

Non-food deflation decelerated to 1.8% in February from the 2.3% decline in January.

British Retail Consortium chief executive Helen Dickinson said global food prices were on average 16% higher at the beginning of 2017 compared to the previous year, but the small increase in prices in February proved 'retailers' resilience in managing to largely shield consumers from cost increases'.

'It is clear that the significant underlying cost pressures which have been building over the last year are beginning to filter through into shop prices,' she said.

'For the time being, consumers continue to benefit from an annual fall in non-food prices, which were down 1.8% on the previous year.

'However, the rate of deflation has eased considerably from a monthly perspective, which can be explained in part by an end to the promotional activity in January, after a weak festive sales performance in some non-food categories.

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'Looking further ahead, retailers, who operate in a highly competitive market with narrow margins, will be increasingly hard pushed to protect their customers from the inevitable impact of these rising cost pressures.

'We can therefore expect this impact to start manifesting in shop prices over the course of the year.'

Nielsen's head of retailer and business insight, Mike Watkins, said: 'At the moment, consumer sentiment around spending intentions is strong so we don't anticipate any significant change on retail spend over the next few months even if shop price inflation gains more momentum.'