Shop prices rise at fastest rate in a decade

Shopping baskets are increasingly weighing down our wallets and make it difficult to cut down on costs, says interactive investor.

• Shop price annual inflation accelerated to 1.8% in February, up from 1.5% in January – the highest rate of inflation since November 2011.
• Rapidly rising food prices, particularly for fresh food remained the key driver behind inflated prices.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Shop prices have risen at their fastest rate in over a decade, adding further pressure on budgets amid the once-in-a-generation style spike in the cost of living.

“Our shopping baskets are increasingly weighing down our wallets because of some eye-watering rises in the prices of everyday essentials. The cost-cutting benefits of switching to lower-priced store brand equivalents wane when prices are rising across the board. Rising prices makes it difficult to cut down on costs and has a disproportionally acute impact on low-income households.

“It is shocking how much activities such as buying groceries, heating up your property, filling up the tank and commuting to work can set people back. The escalating cost of living means consumers face the harsh reality of having to dig deeper to maintain their current levels of expenditure. This is compounded by wage growth that can’t keep pace with inflation, higher energy bills, the upcoming increase in national insurance and a higher tax burden from the freezing of a number of tax allowances – creating a perfect storm for personal finances.

“A lot is changing all at once, and it can be difficult to gauge how and when your finances might be hit, so it remains important to pay extra attention to your financial well-being and consider what protective steps you can take now to avoid money worries later.”

Victoria Scholar, Head of Investment, interactive investor says, “Amid a backdrop of Russia-Ukraine tensions prompting surging commodity prices, this is yet another indication of the seriousness of the inflationary pressures as rising prices for essential goods exacerbate the cost-of-living crisis for families in the UK. There is a vicious cocktail of geopolitical uncertainty, the energy price cap hike, record job vacancies and poor harvests globally that are all contributing to a lower overall level of affordability in the economy.

“The Bank of England may be forced to pick up the pace of its rate hiking timeline. However the monetary policy committee is treading a fine line as it looks to stem the spread of inflation without adding to the economic pressures and inadvertently causing a recession.”