UK shop price inflation rises to 2% in March

British shop price inflation rose in March as the weakness of sterling kept food prices high and boosted the cost of other imported goods, the British Retail Consortium said today.

Annual shop price inflation was 2.0% last month, up from 1.9% in February, the lobby group said.

"The impact of currency changes continues to stoke up shop prices for food and, in recent weeks, for non-food," said Mike Watkins of market research group Nielsen which helps to compile the survey.

Shop prices rose 0.4% on the month, the fourth consecutive monthly rise.

The strength of food price inflation and rising import prices have fed into consumer price inflation, which surprised analysts by rising to 3.2% in February, more than a percentage point above the Bank of England's target.

Sterling has stabilised over the past month, having lost a quarter of its value in trade-weighted terms in the previous 18 months.

Annual shop price inflation fell to 0.5% in December but picked up markedly in January and February, largely thanks to higher food prices.

The BRC said food price inflation remained steady at 9.0% in March while non-food price inflation was -1.5%, compared with -1.7%.

The Bank of England has indicated it will look past the current levels of inflation and still expects consumer price inflation to drop close to zero later this year.

Separate figures on Wednesday confirmed the weakness of Britain's economy, which fell into its first recession since the early 1990s last year.

Full-time job placements fell for a 12th consecutive month in March, according to the REC/KPMG Report on Jobs, while a survey by wage processors VocaLink showed take-home pay growth fell last month to its lowest since the survey began in 2004.

Figures from the National Institute of Economic and Social Research showed Britain's economy probably shrank by 1.5% in the first three months of this year after a 1.6% decline in the fourth quarter.