Inflation falls - but food prices spiral on upwards

The rise in food costs in June of 0.9 per cent, alongside a dramatic annual increase of 6.9 per cent comes as households incomes are being squeezed by soaring fuel bills.

Figures from the Office of National Statistics (ONS) showed that essential foods such as bread, cereals, meat, milk, cheese and eggs increased markedly month-on-month, putting yet more pressure on already struggling households.

However, the fall in the overall inflation rate from 4.5 per cent in May to 4.2 per cent last month was mainly due to the declining prices of goods such as women's shoes and fashions, which went down by 1.9 per cent.

There was also a record monthly fall of 0.9 per cent in leisure and recreation items, with reductions in prices of computer games and consoles as shops promoted heavily to sell the "luxury goods".

But the figures revealed hefty food price hikes, such as 2.5 per cent for meat, 1.7 per cent for milk, cheese and eggs and 1.3 per cent for bread.

The soaring cost of food comes after Scottish Power and British Gas announced controversial increases in fuel bills of almost 20 per cent, which will hit households later this year.

A Scottish business leader warned that the squeeze on household incomes may continue, while a senior MSP claimed the pressure on families north of the Border was "much worse" than the figures suggested.

CBI Scotland assistant director David Lonsdale said: "Inflation is lower than expected in June because of discounting of recreational goods and clothing.

"However, we expect the squeeze on household incomes to continue as inflationary pressures increase in the coming months due to the knock-on effect of the recently announced rises in utility prices. Coupled with a recovering economy, albeit muted, an upwards shift in interest rates before the end of the year cannot be ruled out."

SNP MSP John Wilson, the deputy convenor of Holyrood's economy committee, said the figures showing a fall in inflation did not give a true picture of the extra costs for average families.

He said: "The price increases are much worse, as household inflation is reflected more in relation to normal purchases. Games and toys don't impact heavily on low-income people, as they would see these items as luxury goods they can't afford."These figures don't reflect the rising prices affecting average families in Scotland, who are having to live with much worse increases.

"With the huge increase in energy costs and increasingly expensive food, many families are struggling to survive.

"The UK government has got to take the issue of increased fuel and food costs much more seriously, whether this is through regulation or sitting down with the energy companies and supermarkets to talk about the levels being charged."

Consumer Focus Scotland called for customers to be "protected as much as possible" over rising prices. A spokeswoman said: "Consumers in Scotland are worried about a range of rising costs - from their fuel bills to food bills - and things aren't getting any easier.

"It's important that consumers, particularly vulnerable people, are protected as much as possible and a wide range of help is put in place for anyone struggling - such as help to cut fuel bills or help to deal with debts. No-one should have to choose between heating and eating."

However, the head of the body that represents supermarkets in Scotland said the hike in food prices was "beyond the control" of stores and that global financial pressures were pushing up costs.

Sarah Cordey, from the Scottish Retail Consortium, said: "Competition between retailers is keeping prices down for customers as much as possible.

"The number of products going through the tills which are on some sort of special offer or promotion is at a record level, meaning people can shop around and make savings.

"Food inflation is being driven by factors beyond the control of retailers, such as global commodity prices, worldwide demand and the performance of currency markets. The full impact is not being passed on to shoppers."