The cost of food surges by 4.7%

By SEAN POULTER FOR THE DAILY MAIL
Updated: 03:36 EST, 4 May 2011

Food prices are surging again, fuelling what analysts describe as the biggest squeeze on household budgets for 130 years.

Food price scramble: Supermarkets are offering more discounts.

The annual rate of increase in the average cost of a trolley of food rose from 4% in March to 4.7% in April, according to industry figures.

The rise in the cost of food has now been running well ahead of wage increases for most of the past four years. As a result, many families have cut down on the amount of food they buy and are switching to cheaper ingredients.

There has also been a sharp rise in sales at discount chains Aldi and Lidl, which are growing more quickly than any other supermarkets.

The figures are published today by the British Retail Consortium and suggest the surprise fall in the official Consumer Price index inflation rate to 4% in March may soon be reversed.

The Consortium claimed food price rises would have been even bigger but for the large number of supermarket promotions currently on offer.

Stephen Robertson, the group's director general, said: 'The upward pressures on food prices, which eased in March, bit back in April. The cost of world commodities, including sugar and wheat, rose even more quickly, inevitably working through to some shop prices.

'The consolation for customers is that there is a mass of offers to be had and the fact that 40% of the groceries being bought are on promotion shows that customers are taking up those offers in a big way.'

The shop price data is compiled in partnership with retail experts Nielsen. Its senior manager, Mike Watkins, said: 'With higher inflation likely to be with us for the near future, shoppers need to make the most of their more limited budgets.

'Supermarkets have responded by maintaining the highest-ever levels of promotional offers on groceries and non-food retailers are also delivering more price cuts and mid-season sales.'

Research published by Deloitte this week shows living standards have been squeezed for four years in a row by rising prices and low or no wage growth. This is the first time this has happened since 1870.

Climate extremes of drought and flood have hit crops in places such as Russia, Australia and India. The dry weather in the UK this year has also brought predictions that yields could be down by 30%.

The drive to turn over farmland to biofuels, rather than growing food, is also a factor. At the same time, the increasing wealth of populations in China, India and Brazil is boosting world demand for meat and dairy products.

The BRC said prices in some sectors, such as clothing, are falling, but added that it expects prices 'to remain volatile over the coming months'.