Food inflation is down again, says a report out yesterday from the British Retail Consortium (BRC). As for non-food inflation on the High Street, the annual rate has been negative now for seven months in a row.

Overall annual shop price inflation was 0.7 per cent in June compared with 1.3 per cent in May, says the BRC, while annual food price inflation fell to 5.6 per cent in June compared with 6.4 per cent in May. Back in August last year, the BRC had annual food price inflation running at 10 per cent.

The thing about these annual inflation figures, however, is that they are made up of 13 months of data. It can take quite a time for changes in prices to show in the annual figures.

In fact, the month on month rate of food inflation was 0.3 per cent in June, the highest level since March. As for non food, the month on month rate was just 0.1 per cent, significantly better than the previous month. Clearly, however, if the month on month rate stays at 0.1 per cent for much longer, the annual figures will stop showing negative readings.

The recent fall in sterling is creating a certain amount of inflationary pressure, but since the pound has begun to improve, this effect may soon go into reverse.

As for oil, well, the jury is out. Over the last week or so it fell back from approaching $70 a barrel, to around $60 last night. There really are three camps on this one. There are those who say the recent rise in oil was down to speculation, and point to the massive inventory of oil in tankers, literally floating around. Then there are those who say no, a resurgent China is pushing the price up. Their argument continues that investment in the oil industry has been too low, and current capacity is just too low. Then there’s the Thomas Malthus camp who simply say population pressures mean oil is set to rise again, and will remain high – permanently, especially as we head to the era of peak oil.

Stephen Robertson, British Retail Consortium Director General said: “Food inflation is now the lowest it’s been for 14 months. That’s largely because of falling fresh food inflation, particularly for dairy products and some meats.

“The pound’s recent revival is easing the cost of imports and overseas demand for UK produce. Oil prices are up since the start of the year – but are half their peak last July. Food inflation is likely to keep falling.

“Overall shop price inflation is the lowest since last December. Non-food prices have been cheaper than a year ago every month since then – with the biggest drops in clothing, footwear and electricals.

“With unemployment going up, consumer confidence continues to be fragile. Retailers have reacted by offering widespread discounts and promotions – usually at the expense of their own margins. The Government must play its part by removing unnecessary burdens – allowing retailers to help hard-pressed customers and sustain retail jobs.”

© Investment & Business News 2013