According to the latest ONS inflation data, UK food and beverage costs experienced a 19% year-over-year increase in April 2023 through the CPI method. This has resulted in an ongoing challenge for households. However, this trend has shown a slight decline, as the previous figure in March showed a 19.1% increase.
In agreement with these figures, IGD’s forecast indicates that food price inflation may have reached its highest point. James Walton, Chief Economist at IGD, explains that the forces behind this increase, such as the cost of energy, fertilizer, and basic food, are beginning to lose momentum, resulting in a downward trend. Nonetheless, there are still additional cost increases to work through the system despite the number of hurdles such as long and complex supply chains and ongoing contractual arrangements, offering little relief for hard-pressed shoppers.
Despite this challenge, food retailing is highly competitive, and businesses are incentivized to pass the benefit of lower costs promptly onto customers. Many supermarkets have already initiated this approach by delivering price cuts for essential items such as milk, bread, and butter in April and May. There are several variables in play, including unpredictable weather and crop yields. But barring any major new shocks, IGD forecasts that food price inflation will begin to gradually decrease as the year progresses.
In their upcoming economic Viewpoint report slated for release on June 8th, IGD will explore what is next for food inflation, providing insight and analysis to help businesses prepare and adapt to future market trends.
