The cost of shopping continues to rise

Consumers in the UK have been hit with a variety of increased costs over the past couple of years, and it seems as though each time we think that we can see the light at the end of the tunnel something else comes along to plunge us back into financial hardship.

Between August 2006 and July 2007 it was homeowners with variable rate mortgages that were getting hard hit, as interest rates soared five times by 0.25% each time, taking the base rate up by 1.25% within the space of a year.

At the end of last year the interest rate started to fall again, which came as welcome relief for millions of homeowners, and by April of this year it had fallen three times, each by 0.25%, taking the base rate back down by 0.75% in total.

However, homeowners did not benefit as much as they had hoped, because at the start of the year the energy giant announced that gas and electricity prices would be going up due to rises in wholesale energy prices, and within the first few weeks of the year consumers were hit with significant hikes in their energy bills.

This was followed by a series of other rises, including water rates, council tax, and in particular the cost of petrol, which has soared over recent months due to the cost of oil. Another living cost that has also soared recently is the cost of food, which has shot up over recent months, putting increased pressure on household finances, particularly for larger families.

According to a recent report the cost of a grocery shop at the supermarket has soared by 5.8% since the start of this year, and industry professionals claim that it is set to keep on rising. Many commonly purchased supermarket items have rocketed in price since the start of the year, including the cost of fruit and vegetables, which has gone up by a whopping 16%.

Meat and fish products are said to have gone up by around 7%, dairy products by over 6%, and frozen foods by around 4.5%. The data comes from the retail analyst Verdict.

Officials from the Confederation of British Industry stated that around 56% of retailers reported higher selling prices for May, and this is the highest level since 1992. This means that price hikes on shopping are occurring at the fastest level in sixteen years.

The news gets worse, as the Organisation for Economic Co-operation and Development has predicted that over the next decade the cost of vegetable oils will increase by a massive 80%, whilst beef and pork prices rise by 20%, and sugar by 30%.

It was noted that whilst the cheapest ranges did not see much difference in price, it was the branded products that had seen the highest price hikes. Supermarkets’ own ranges also saw price hikes but not as much as those seen on branded goods.

Some are concerned that healthier eaters are getting hit hardest by the prices hikes, with fruit and vegetables – of which we are meant to eat five a day to maintain good health – seeing massive price increases.

One industry official stated: ‘An increase in prices of 5.8% since the start of the year is particularly painful. It means that in effect, compared to January, the nation is paying an additional £514m for its grocery shopping. Such rises, combined with hikes across other areas of household expenditure, are squeezing the amount consumers have to spend on things such as leisure activities and on other retail goods.’

One official from Verdict added: ‘For many, the price of the weekly food shop is the real measure of inflation - it’s what they react to when they make decisions about the household budget and what to spend on other things. For those at the lower end of the income scale, increases in food prices can be difficult because they aren’t many other areas where they can cut back to make savings.’

Of course, the increase in the cost of food, as well as other price hikes such as petrol and bills, has left consumers with very little money to spend elsewhere, and this is affecting the business that other retailers are getting, adding to concerns of recession.

One official said: ‘The High Street has faced another testing month as consumer spending power has been hit by the rising cost of fuel and food, as well as credit-crunch worries. It is encouraging that retailers can see some recovery in sales next month, but they are not optimistic about the business outlook and retail conditions are likely to remain tough.’