Inflation surge bites
Bank of England rate setters face another tough decision as fresh evidence emerges that soaring inflation and sluggish high street sales continues to put pressure on consumer’s pockets and the wider economy.
Prices charged by manufacturers at the factory fate rose by 10 per cent in June – the highest rate since comparable records began, according to official figures.
Underpinned by rising food and energy costs, raw material prices climbed 2.1 per cent higher last month pushing the annual input inflation rate for a year ending June to a record 30 per cent.
Meanwhile, while overall high street sales grew 2.1 per cent in the year ending June, like-for-like sales suffered, falling 0.4 per cent, according to data from the British Retail Consortium. This compares to the previous year when they were up 3 per cent.
Food and drink was the only sector to show significant growth but that was against a weak June 2007, while other sectors suffered despite heavy discounting to encourage shoppers.
“This environment is a hugely challenging one for retailers– for the food retailers with their own costs continuing to rise, and for non-food retailers trying to win back a greater share of wallet,” said KPMG’s head of retail Helen Dickinson.
Global Insight chief UK economist Howard Archer added: “These are a pretty horrible set of data overall. Ongoing elevated inflationary pressures continue to constrain the Bank of England’s ability to deliver any time soon the interest rate cuts that the economy so badly needs.”