U.K. shop-price inflation accelerated in March and the impact of the pound’s weakness on import prices is beginning to be felt, the British Retail Consortium said.
Retail prices rose 1.4 percent from a year earlier, compared with a 1.1 percent gain in February, the trade group said in a report in London today. Food-price inflation was unchanged at 3.5 percent, while non-food prices rose 0.2 percent, the first annual increase since December 2011.
With demand muted, the BRC said upward pressure isn’t coming from consumers and it noted the pound’s depreciation this year. The Bank of England has also raised concerns about the currency’s weakness and its impact on inflation.
“If the downward trend in sterling persists, the full inflationary impact will still take time to filter through to prices as retailers use hedging strategies and long-term contracts to limit the impact of price shocks in consumer markets,” the BRC said. “However, the impact of a 5 percent decline since the start of the year is beginning to show.”
Sterling has weakened about 4.5 percent versus the euro this year and is the second-worst performer after the yen in 2013, based on Bloomberg Correlation-Weighted Indices.
Overall prices rose 0.4 percent in March from February, while food prices increased 0.6 percent, according to the BRC. The group said that “prolonged unseasonably cold and wet weather” may prompt price reductions in stores to boost demand.
“As discretionary spending for the next few months is expected to remain flat at best, what upward pressure there is on prices is not coming from the consumer at the moment,” said Mike Watkins, head of retail at Nielsen.
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