Retail inflation at three-month high thanks to weak pound and high oil price

Annual shop price inflation hit its highest level since January last month as soaring petrol costs pushed up food prices, figures showed today.

The annual rise in the cost of retail prices leapt to 2% last month, reversing recent sharp declines, according to the latest British Retail Consortium-Nielsen Shop Price Index.

Food inflation rose to 2% after dropping to 1.2% in March, a low for the index. The BRC said rising commodity prices, such as oil and cocoa, had put the cost of food under pressure.

Non-food prices also rose, from 1.3% in March to 2% last month, marking the highest level since the survey began in 2006.

Wider inflation is also moving higher - reaching 3.4% in March, which was higher than expected and raising fears that fuel costs could lead to further increases.

The BRC said oil prices, which are up 70% over the year, have a direct impact on the cost of distribution and therefore retail goods, as most products are transported by ship or rail. The weakness of the pound has also pushed up import costs for many retailers.

But the BRC said it believed retail price inflation would remain stable throughout the year, with retailers also slashing prices to remain competitive.

Stephen Robertson, director-general of the BRC, said: "With commodity prices, including oil and cocoa going up, food prices were almost bound to rise when compared with last month's three-year low.

"Even so, food inflation is a quarter of what it was this time last year while some produce - milk, cheese and eggs - is actually cheaper than 2009."

Food which can be stored and sold at room temperature saw the biggest rise in food price inflation, to 3% year-on-year, while fresh food inflation increased to 1.2%.

The volcanic ash cloud disruption increased the cost of some items, such as exotic fruits and mange tout, but had little impact as less than 1% of imported fresh fruit and vegetables travel by air, said the BRC.

DIY, gardening and hardware product prices rose by the most in the non-food sector, up by 6.5% on an annual basis. Furniture and floorings prices also raced higher, with inflation of 3% against 1% in March.