Food and fuel 'to hit inflation'

Retailers are facing tough conditions on the High Street, say analysts

Rapid rises in food and fuel prices are expected to push up the inflation rate when figures for June are released.

Consumer price inflation is already at a 10-year high of 3.3% and the Bank of England has said that it expects it to rise above 4% later this year.

Most analysts think the figure for June will make a step in that direction.

Meanwhile, figures suggest the number of people moving house is at its lowest since records began in 1978 and High Street sales are gradually weakening.

Data from the Royal Institution of Chartered Surveyors show there were 15.3 transactions per surveyor during the three months to the end of June.

This environment is a hugely challenging one for retailers Helen Dickinson KPMG 'Sales stagnant' on High Street Numbers moving home at new low

And British Retail Consortium (BRC) figures suggest that consumers' spending is gradually slowing.

The BRC says total High Street sales for June, which include new stores, rose 2.1% year-on-year. But like-for-like retail sales fell 0.4% compared with June 2007.

Underlying High Street sales have now been lower than a year ago for three of the past four months.

Helen Dickinson, head of retailing at analysts KPMG, said: "Consumers are managing their budgets carefully to mitigate the effects of these inflationary pressures and the food retailers continue to focus on keeping consumer prices down through high-profile promotional activity, despite the increase in oil and commodity prices."

She added: "This environment is a hugely challenging one for retailers - for the food retailers with their own costs continuing to rise, and for non-food retailers trying to win back a greater 'share of wallet'."