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UK food inflation jumped 2.6% year-on-year in April, according to new figures, building on increases of 2.4% in March and heading above the three-month average of 2.4%.
The moves higher pushed food price increases to an 11-month high, according to data from the British Retail Consortium (BRC), with everyday essentials including bread, meat, and fish feeling the squeeze.
The increases come as retailers grapple with a rise in employment costs in the form of higher employer national insurance contributions and increased national living wage.
“Despite price competition heating up, retailers are unable to absorb the total impact of these £5bn of employment costs and the additional £2bn costs when the new packaging tax comes into effect in October," said Helen Dickinson, CEO of the BRC.
"It is crucial that poor implementation of the upcoming Employment Rights Bill does not add further pressure to costs — pushing prices further up, and job numbers further down.”
Jumps in prices in the shops could put the Bank of England on further alert for inflationary signals as it looks likely to cut interest rates in its next meeting in May.
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Speaking at an event hosted by the Institute of International Finance in Washington DC last week, the BoE governor Andrew Bailey said the central bank was “working through” the economic implications of US president Donald Trump’s tariff policies ahead of its upcoming Monetary Policy Committee meeting.
"We're currently working through that because we've got an interest rate decision coming in two weeks' time," Bailey said, in comments that reinforced growing investor expectations of a rate cut.
Markets on Wednesday priced in a 100% probability that the BoE will lower rates by 25 basis points, amid mounting concerns that a breakdown in global trade could weigh heavily on the UK’s already sluggish growth prospects.
Despite a jump in food costs, worries about inflation could be seen as overcautious. The BRC's figures for April show that overall, shop price inflation actually decreased by 0.1% in April, compared with a year ago. Non-food items fell in price by 1.4% compared with 1.9% declines in March.
“Shoppers continue to benefit from lower shop price inflation than a year ago, but prices are slowly rising across supply chains, so retailers will be looking at ways to mitigate this as far as possible," said Mike Watkins, Head of Retailer and Business Insight, NielsenIQ.
"And whilst we expect consumers to remain cautious on discretionary spend, the late Easter will have helped to stimulate sales.”