Shop prices climbed at their fastest rate in nearly a decade to reach 1.5% in January, according to the retail industry.
Figures from the British Retail Consortium reveal that shop price annual inflation accelerated to 1.5% in January, the highest rate since December 2012 and up from 0.8% in the previous month.
The rise was led by food prices, which were up 2.7%.
“January saw shop price inflation nearly double, driven by a sharp rise in non-food inflation. In particular, furniture and flooring saw exceptionally high demand leading to increased prices as the rising oil costs made shipping more expensive,” BRC chief executive Helen Dickinson said.
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“The rise in shop prices is playing into wider UK inflation, which is pushing cost of living to the forefront of the political agenda. Many households will find it difficult to absorb the additional costs, as well as others on the horizon.
“Retailers are working hard to cut costs, but it would be impossible to protect consumers from any future rises. As commodity prices, energy prices and transportation costs continue to rise, it is inevitable that retail prices will continue to follow in the future.”
Soaring food costs and the energy bill crisis drove inflation to 5.4% in the 12 months to December, up from 5.1% the month before, in another blow to struggling families.
The last time inflation was higher was in March 1992, when it was 7.1%. And with gas and electricity costs set to rise further in the spring, analysts predict it will reach that level again.
“As costs rise, consumers are cutting back. Most commonly, those we surveyed say they will reduce spend on eating out, takeaways and clothing, to offset their overall household budget being squeezed,” Linda Ellett, head of consumer markets, leisure and retail at KPMG UK, said.
“Increasingly, consumers are searching for promotions or cheaper alternatives. Of course, businesses operating in this landscape are facing their own inflationary pressures and they face tough decisions on whether and how to increase prices.”
The Resolution Foundation predicts higher energy bills, stagnant wages and tax rises could leave households with a £1,200 ($1,620) a year hit to their incomes.
“The surge in energy and travel costs is now impacting disposable incomes and is likely to dent consumer’s willingness to spend,” Mike Watkins, head of retailer and business insight, NielsenIQ, said.
“Nearly a half of all households are saying that their most important concern at the moment is the rising cost of living. This will mean stores will need to encourage cash-strapped customers to keep shopping and despite the increase in shop prices, retailers are responding by keeping price increases as low possible for as long as possible."
The government says it has put £4.2bn in place to support families.
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