2023 will be “another difficult year” for consumers and businesses as inflation continues
The recent cold snap, which forced people to spend more on their energy bills, along with the impact of the Ukraine war, meant “a challenging Christmas” for many households across the UK.
Covering 1-7 December 2022, while shop price annual inflation decelerated to 7.3%, down from 7.4% in November, that was still above the three-month average rate of 7.1%, leaving shop prices near record highs, according to the BRC-Nielsen Shop Price Index.
While food inflation accelerated strongly to 13.3% in December, up from 12.4% in November – the highest inflation rate in the food category on record, non-food inflation decelerated to 4.4% in December, down from 4.8% in November, as retailers discounted to clear excess stock.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “It was a challenging Christmas for many households across the UK. Not only did the cold snap force people to spend more on their energy bills, but the prices of many essential foods also rose as reverberations from the war in Ukraine continued to keep high the cost of animal feed, fertiliser and energy.
“Non-food price rises eased as some retailers used discounting to shed excess stock built up during the disruptions to supply chains, meaning some customers were able to bag bargain gifts. The combined impact was that price increases overall plateaued, with the reduction in non-food inflation offsetting the higher food prices.
“2023 will be another difficult year for consumers and businesses as inflation shows no immediate signs of waning. Retailers will continue to work hard to support their customers and keep prices low. However, further high investment in prices may no longer be viable once the Government’s energy bill support scheme for business expires in April. Without the scheme, retailers could see their energy bills rise by £7.5 billion. Government must urgently provide clarity on what future support might look like or else consumers might pay the price.”
Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, commented: “Consumer demand is likely to be weak in Q1 due to the impact of energy price increases and for many, Christmas spending bills starting to arrive.
“So, the increase in food inflation is going to put further pressure on household budgets and it’s unlikely that there will be any improvement in consumer mind-set around personal finances in the near term. With shoppers having less money to spend on discretionary retail having paid for their essential groceries, there will be little to stimulate demand across the non-food channels.”