Food prices pushed higher by rising petrol costs

3 min Read Published: 05 May 2010

 

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

The annual rise in the cost of retail prices leapt to 2pc in April - reversing recent sharp declines - according to the latest British Retail Consortium (BRC)-Nielsen Shop Price Index.

Food inflation rose to 2pc after having dropped to 1.2pc in March, which was its lowest level in the history of the index. (The full story can be found in the Telegraph by following this link)

But this would not have been news to regular readers of this blog as on the March 16th I predicted that this would be inevitable. (see my post Headline of the Day: Petrol prices could hit £1.20 within the coming weeks sparking fears of further increases in inflation).

Back then I wrote:

One concern I have is that if fuel prices increase further then delivery costs will also rise and hence so will the cost of goods we buy (i.e. inflation). So a double whammy for consumers who own a car. Let’s hope we are not in for a summer of fuel protests.

As an aside the cost of holidaying in the UK will inevitably go up if fuel prices rise (it’s a long way from London to Cornwall) which might turn people back to budget airlines and a foreign get away to in the sunshine. But then their pound won’t go very far abroad. So depending on which wins the ‘value’ tug of war it could also be bad news for UK tourist spots.

Obviously my powers of fortune-telling did not forsee a volcano erupting in Iceland which caused international travel chaos (and still is in some parts). Unfortunately, I doubt that will be enough to deter people from  holidaying abroad. But interestingly, elsewhere in the news the Euro has fallen (see the graph below of GBP vs 1 Euro) against the pound on the back of the debt crisis sweeping Europe. This means that the UK holiday makers are getting more for their money in Europe than they did in March (around 5% more).

 

I suppose what I am trying to highlight is that beyond the headlines there is always another story which it is worth thinking about.