IGD, a well-known research firm, has recently released a report that delves into the future of food inflation. The report features IGD’s latest projections for food inflation, the causes behind the persistence of food inflation, and the impact on consumers and the food industry. So, what does the report say?
According to IGD, food inflation in March has probably peaked at 19.1%, and it is projected to decline to 8.10% by December 2023. This figure is 1% higher than IGD’s previous forecast. Additionally, the report predicts that the average whole year food inflation for 2023 will range between 14% to 16%, and 1% to 3% for 2024. Moreover, IGD anticipates that food and drink will contribute 47% of overall inflation by Q1 2024 compared to 21% in Q1 2023.
The report sheds light on some of the reasons behind the persistence of food inflation. For instance, the industry is reliant on agricultural and industrial processes that have long production cycles. Additionally, supply chain arrangements mean price changes can take time to be passed on to the consumer. Furthermore, many businesses are not yet passing cost increases on to consumers, which has impacted their profitability. Limited natural resources, such as soil, water, and labor, also contribute to the issue.
Furthermore, the report acknowledges that there will be challenges for future investment in the food industry. With lower profits and falling volumes, this sector will have to contend with a reputational risk. In particular, there is an increasing divergence between food price inflation and all items inflation. Consumers’ disposable incomes are also projected to fall by 7% by March 2024, the largest fall since records began. This will influence their purchasing decisions. Changes in shopping behavior have already occurred, with three-quarters of consumers stating that the cost of living and fallout from Covid-19 have impacted their food shopping choices.
In conclusion, IGD’s report provides valuable insights into the future of food inflation and its ripple effects on the food industry and consumers alike. To access the full report, please visit: https://www.igd.com/Social-impact/Economics/Viewpoint-Special-Exploring-whats-next-for-food-inflation.
