Shop prices creep up as retailers brace for Iran war disruption

Shop price inflation edged up in March as cost rises related to the Iran war began to take effect. 

The cost of shop items increased by 1.2 per cent year on year in March, up from 1.1 per cent in February, according to data compiled by NIQ for the British Retail Consortium (BRC).

The BRC warned supply chain disruption caused by the war in the Middle East is beginning to feed into supply chains in the UK, and called on the government to listen to the concerns of retail bosses.

March’s 1.2 per cent rate of shop price inflation stood slightly below the 1.3 per cent average of the last three months. 

Non-food inflation increased to 0.1 per cent in the year in March, compared to a decline of 0.1 per cent in February.

Fresh food inflation increased from 4.3 per cent in February to 4.4 per cent last month, while total food inflation fell slightly from 3.5 to 3.4 per cent. 

Non-perishable food saw the biggest drop in price inflation, down to two per cent from 2.3 per cent in February, below the 2.4 per cent three-month average.

The BRC attributed the slight decline in total shop price inflation to deals offered on alcohol and televisions during the Six Nations, and other promotions on clothing and footwear designed to stimulate spending. 

The BRC warned “storm clouds loom” as the impact on shipping and fuel prices caused by the blockage of the Strait of Hormuz begins to affect suppliers’ costs.

Retailers pray for strong Easter sales

Helen Dickinson, the BRC’s chief executive, said: “Higher costs resulting from the conflict in the Middle East are starting to feed into supply chains. 

“While retailers will work with their suppliers to mitigate the impact on prices as far as possible, inflation will rise, although there are no indications it will reach the peaks of the last spike in April 2023. 

“[The] government needs to look at all the costs that could exacerbate these price rises.”

Last week, retail giant Next said it is already expecting a £15m hit from the conflict and could be forced to raise prices by between five and 10 per cent in the Autumn if disruption continues to push up manufacturing costs.

Mike Watkins, head of retailer and business insight at NIQ, said: “Whilst it’s good news that food inflation slowed in recent weeks, shoppers are increasingly conscious of the amount of money they are spending at the checkout, and non-food retailers will be hoping for a good Easter to drive sales.”

Retail sales fell last month as Brits cut back on food and household goods spending after cashing in on seasonal deals earlier in the year, according to the Office for National Statistics (ONS).

Wet weather and “fragile” consumer demand have contributed to a tough start to the year for retailers, analysts said, though online sellers defied the broader trend with strong sales.