According to the British Retail Consortium, high sugar costs are driving up the price of sweets and chocolate, keeping food inflation stubbornly high.
Consumers are facing food prices 3.2% above their levels in May last year, the industry group said. While fresh food inflation has slowed to 2%, the cost of non-refrigerated products is still up 4.8% from the previous year.
Helen Dickinson, chief executive of the BRC, said global markets were still placing a heavy burden on British shoppers.
However, the BRC said inflation had returned to “normal levels”. Annual retail price inflation fell to 0.6% in May from 0.8% in April, while prices of non-food items such as furniture and electronics fell.
She said: “Food inflation remained more persistent, especially for sugary products, which continued to feel the impact of high global sugar prices.”
Sugar prices on global markets have fallen in recent months, according to data from the Food and Agriculture Organization of the United Nations. However, costs remain around 15% above levels at the time of Russia's invasion of Ukraine in February 2022.
Non-food items in stores are now 0.8 percent cheaper than a year ago, according to the BRC.
Ms Dickinson said: “Retailers are cutting furniture prices in a bid to revive subdued consumer demand for expensive items, and football fans have been able to pick up some bargains on TVs and other audiovisual equipment in the run-up to this summer's Euro.”
The overall decline in retail price inflation to 0.6% – the lowest level since November 2021 – supports the belief that the cost of living crisis is now coming to an end.
Economists expect that as a result the Bank of England may cut interest rates later this year from the current 16-year high of 5.25%. That will be the first cut in borrowing costs since the Monetary Policy Committee, led by Governor Andrew Bailey, began raising the base interest rate from 0.1% in December 2021 as it tries to tackle rising prices.
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