Responding to the latest CPI inflation figures, which show headline inflation rose to 3.5%, and food inflation held steady at 1.3%, Harvir Dhillon, lead economist at the British Retail Consortium (BRC), says: “With Christmas around the corner, consumers will be understandably concerned by the third increase in inflation in three months.
"A large part of this is the sharp rise in petrol and diesel prices. The lifting of the Ofgem price cap this month will push up October’s figure when published in November, having already driven up household energy bills and likely to do so again in January. Rises in the cost of household appliances and pharmaceuticals will further squeeze household budgets.
"However, intense competition between supermarkets has helped hold inflation steady for consumers despite a multitude of supply chain shocks this year. This stability was anchored by drops in the price of butter, coffee and potatoes, helping to ease the pressure on consumers.
“Retailers and Government are aligned on the need to tackle the high cost of living, and next week’s Budget provides a crucial opportunity to do just that. If Government can cut the cost of doing business, retailers will be in a better position to hold back price rises and increase investment in stores and jobs.
"However, today’s figures, which determine April 2027’s business rates uplift, mean retailers are on the line for around £250m in additional bills, unless action is taken. Now is not the time to pile on millions in extra costs, and If the Chancellor is serious about reducing the cost of living, he must freeze rates for the year ahead. Cut the costs on businesses and will be families who ultimately benefit.”
Furniture, household equipment and maintenance inflation grew to 1.0% in September, from 0.8% in August.
Andrew Phillips, the MD of V12 Retail Finance, comments: “The rise in inflation to 3.5% is an unwelcome development for households, particularly after three consecutive increases and with today’s figure coming slightly ahead of expectations. Higher petrol costs have been an important driver, but the increase in services and core inflation suggests that consumers are facing broader price pressures at a time when many households are already having to manage their spending carefully.
"What we are seeing, however, is not a consumer who has stopped spending, but one who is becoming increasingly selective about where their money goes. Our latest data showed the value of retail finance provided through V12 rising 7% YoY in the third quarter, with particularly strong demand for spending on the home and other practical purchases. Home improvement finance more than doubled, while healthcare and dental finance also continued to grow. That suggests households are still prepared to make larger purchases where they see a clear need or long-term value, even as wider cost pressures remain elevated.
"With inflation proving more persistent and the prospect of interest rates remaining higher, affordability is likely to become an even more important consideration in the months ahead. As we approach Black Friday and Christmas, retailers will be competing for a consumer who remains willing to spend, but who is thinking much more carefully about value and how larger purchases fit within the household budget.”
