Rising cost of food keeps Britain's families on financial tightrope

HOUSEHOLDS in Britain were squeezed further by high bills last month as a result of rising food costs, new figures published today show.

The average food bill was 5 per cent higher than the same time last year, the British Retail Consortium statistics show, despite a fall from last month.

Shop price inflation slowed down slightly to 2.8 per cent from 2.9 per cent in June, while there was also a fall in food inflation, down from 5.7 per to 5.2 per cent.

The slight easing in UK food bills was due largely to retailers slashing prices to draw in cash-strapped consumers, the BRC said, with 39 per cent of all groceries bought in supermarkets subject to special offers. Food costs edged down as good crops of seasonal fresh fruit and vegetables helped boost supplies and cheaper animal feed eased pressure on meat prices, they added.

BRC director general Stephen Robertson said: "The fall in overall shop price inflation came almost entirely from food. Customers have adapted their shopping habits to higher levels of inflation over the past few months.

"People are increasingly taking advantage of promotions to help mitigate against the full impact of inflation."

Non-food inflation - which includes anything from clothing to electricals - was unchanged in July at 1.3 per cent, according to the report.

It also said that the effect of January's rise in VAT, the impact of past rises in key commodities continuing to feed through to consumer prices and import inflation from the weakening of sterling, and rising in prices in China are still putting pressure on shop prices.

Leigh Sparks. professor of retail studies at Stirling University, said food volume sales in the major supermarket chains were down, with the squeeze on disposable incomes meaning people were either buying less food or were going to discount stores instead.

He said it was becoming harder for supermarkets to pass on the price rises in case it exacerbated the decline in sales, as consumers became increasingly wary about how they spent their money.

The Asda Income Tracker showed that during June, the average UK household had a weekly discretionary income of 167, which is 5.1 per cent less than year ago, the equivalent of a 9 fall in income compared with the same month in 2010.

Looking ahead, the BRC said many analysts expected little relief for food inflation as grain prices were likely to remain high until the end of this year.

Weather will play a vital role in the outlook for crop yields, as ideal conditions will be needed in the US farm belt and other farming regions to combat supply constraints.The drop in prices will offer some relief to consumers as well as the Bank of England, which is battling with 4.2 per cent inflation - more than twice its target.

Pressure on the Bank to raise interest rates from lows of 0.5 per cent to combat a high cost of living has come off the boil in recent months as the rate of inflation has slowed.

Prof Sparks said while consumers were struggling with the financial squeeze, they would eventually accept the situation.

"Consumers will adjust to 'the new normal', when they realise the world isn't going to go back to how it was a few years ago and we are going to have this period of austerity."