Supermarket shoppers have struggled painfully for a year with the impact of price inflation, being forced to pay more for staples such as bread, rice and milk.

At the same time, though, they have at least been able to take comfort from the price of clothing and other non-food goods remaining reassuringly low.

But now the era of cheap Primark-style fashions could also be drawing to a close, with the inflation that has taken a toll on household food budgets expected to be mirrored elsewhere on the high street.

Non-food retailers face the biggest inflationary pressure in a decade, and are girding themselves for a squeeze on profit margins as they desperately seek ways not to pass on costs to already cash-strapped consumers.

“You have either got to grab market share more aggressively to get the same cash margin or you’ve got to put prices up,” says Phil Wrigley, executive chairman of New Look, the fashion chain. “I think a lot of people are selectively and carefully edging prices up.”

Mr Wrigley is adamant, however, that there are other strategies to deploy before New Look will force higher prices on shoppers. “We do not believe this is the time to pass it on to the customer,” he says.

“There are always inefficiencies in the supply chain and other parts of the business. We [need to ask ourselves whether we could] plan more intelligently and fly fewer products in …and save a significant sum of money on air freight costs and therefore compensate for some loss of gross margin.”

In a detailed report on inflationary pressure, analysts at JPMorgan concluded that clothing retailers faced 4 per cent cost rises, furniture stores 10 per cent and jewellers 8 per cent. Raw materials from diamonds to cotton have seen big increases.

Michael Saunders, an economist at Citigroup, says input prices, excluding oil, fell 12 per cent between December 2005 and December 2007 but rose 8.5 per cent between May 2007 and May this year.

Between inflation and “the very severe consumer downturn that now seems to be under way” something has to give, he says. “The thing that we can be reasonably confident is that between those [factors] margins get crushed.”

Richard Chamberlain, one of the authors of the JPMorgan report, holds out a little more hope for companies with scale and strong international brands. “[They] can negotiate quite hard,” he says. Retailers such as Spain’s Inditex, operator of Zara, and Sweden’s H&M are in this bracket. But in the UK, the weakening pound has created an extra problem. “We think inflation has come at a bad time, and is another reason to be cautious on the sector short term,” the JPMorgan report concludes.

Clothing retailers have benefited from sector deflation for more than a decade as, en masse, they shifted production to lower-cost economies such as China. Just 10 years ago the UK was the single biggest source of goods for Marks and Spencer and Next, and both companies have boosted margins by moving abroad.

But with freight, raw materials and wages all on the rise some clothing retailers are looking to move again – into parts of China that are not experiencing the same levels of wage inflation, for example. Though with scrutiny of fashion chains’ sourcing policies at its most intense, there is a pressing need for caution about moving into countries that cannot guarantee labour standards.

Those companies selling the cheapest clothing items, such as Matalan, Primark and the supermarkets, are running out of options. JPMorgan makes the point that a £2 T-shirt has a much higher proportion of raw material cost built in and a lower gross margin than a £100 dress. The discounters, more than the upmarket brands, may have to raise prices to remain profitable.

At Halfords, managers are looking closely at whether they can change product specifications that will allow the company to maintain prices without a notable loss of quality. Nick Wharton, finance director, points to the retailer’s 149-piece toolset at £19.99, where the mix of tools has been altered to substitute some metal-intensive products.

“Our default position is not to directly pass any inflation on to the consumer,” says Mr Wharton. He acknowledges, though, that there are areas, such as engine oil, where the soaring cost of the commodity means the whole market is increasing prices.

One retailer’s inflationary problem can be another’s opportunity, though. Wyevale Garden Centres, for example, is benefiting from higher vegetable seed sales, which it describes as “a Felicity Kendall and Richard Briers moment” – a reference to the sustenance farming in the vintage comedy The Good Life.

There are other resilient retail sectors, such as electronic goods and TVs, but in almost every other category inflation is becoming a fact of life. With consumer price inflation uncomfortably high and consumers squeezed, this is a bad time for shoppers and shopkeepers alike.

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