Food inflation starts to slow in the UK, but has anyone noticed?

Shop price inflation overall dropped to 8.4 per cent in June, down from 9 per cent in May

Shoppers at a supermarket in London on July 19, 2023. UK Inflation has fallen to its lowest level in more than a year to 7. 9 per cent in June. Andy Rain / EPA
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Across the world, the rising cost of living has made it difficult for many to afford basic goods and services. Crop failures and soaring energy prices are contributing to global rising inflation rates as millions struggle to make ends meet.

Since January, 'The National' has been tracking the prices of food staples in supermarkets across the Middle East and North Africa, as well as in India, the UK and the US to see how consumers have been affected.

A decrease in food inflation in the UK could signal the start of a “slow easing off” of the rampant rises in grocery prices experienced across the country this year, analysts said.

In late June, shop price inflation fell to 8.4 per cent, down from 9 per cent in May and below the three-month average of 8.7 per cent, according to the BRC-Nielsen Shop Price Index.

However, to people shopping in the small open-air market in central London’s Tachbrook Street, the effect is so small, no one has even noticed. On the contrary, they noted that prices for some goods continue to rise.

“Everyone has noticed the rises,” shopper Michael told The National.

Iranian Naser Mansouri, who works at his brother’s stall at the market, said the price of vegetables increased sharply over the past year.

“Okra is £8 per kilogram. Last year it was about £6,” he said.

“One year ago, cucumbers were £3 per kilogram. Now they are £4.”

Mr Mansouri said watermelons had gone up most in price, from 90p per kilogram to £1.30. He said customers have been complaining about his prices, saying produce was cheaper in supermarkets.

“It’s hard for us [to compete],” he said.

Ahmad Than, who works on a rival stall, said prices for all produce had gone up and that he was doing all he could to entice shoppers to still buy.

“We’re trying to sell still at a good price,” he said.

Though food inflation has come down, the decline has not been across the board and the cost of some goods continue to rise, which begs the question: why?

“When you look down into the broader figures, there are fewer things showing massive growth,” Sarah Coles, head of personal finance at Hargreaves Lansdown, told The National.

“You have things like olive oil, which is up very nearly 50 per cent.”

An index compiled by The National tracking the cost of supermarket goods including bread, milk and beef since the start of the year recorded a spike in price for the most basic of commodities.

The cost of locally produced beef has soared, from £3.58 per kilogram in January to £4.98 in June. The price of baby formula jumped from £13.50 to £14.50.

The cost of some products appears to have been more stable, such as for sliced bread, which was consistent in the first four months of the year. It has since fallen to 75p a loaf from 85p in April, according to the index.

Yet this does not tell the full story, because supermarkets typically offer discounts on prices, particularly on their own branded goods, as Sainsbury’s did recently when it cut the cost of 40 of its products.

“The way we see supermarkets operate is they may cut the price of some things, just to be able to promote them. It’s good for supermarkets to be able to say they’re cutting the price of the basics,” said Ms Coles.

“Supermarkets have such a large array of the basics, so they can cut the price on the bog standard loaf, but they are still selling artisan sourdough for an arm and a leg.

“The way that the process is likely to work is you will see a few high-profile decreases but the rest is just going to rise less quickly.”

Industry-wide data shows the price of bread was up 20.5 per cent in the year to the end of December, and is now up 15.3 per cent.

Low fat milk was up 46 per cent in the year to the end of December and is now up 28.5 per cent

Butter was up 29.3 per cent in the year to the end of December and is now up 14.1 per cent.

“This comes down to falling commodity prices – including milk and wheat. This passes fairly quickly into fresh food prices,” said Ms Coles.

But the cost of goods with a long production time is still rising.

“Highly processed food can take about nine months to get to the shelves.

“And so we are not going to see those food prices coming down in a hurry,” she said.

That includes anything which has a long shelf life, with a lot of processes in it, including canned and frozen food.

“Frozen food is showing quite a lot of increases as well. It’s energy-intensive processes,” said Ms Coles.

But sometimes the reasons for significant price rises are more complicated.

Cheese, which needs to be aged, is up 33.4 per cent in the year-end to December. Other factors driving the rise include the fact more is imported from Europe compared to other dairy products, and Brexit-related changes have added to the cost, said Ms Coles.

Olive oil is up 46.9 per cent. “Poor harvests in Italy and Spain mean less olive oil is produced. The reduction in sunflower oil exports from Ukraine has put pressure on all cooking oils,” she said.

“Sugar is up 49.8 per cent: the wholesale cost of sugar remains high because of poor harvests and global demand.

“Sauces are up 35.1 per cent. The longer and more complex supply chains mean it takes longer for price reductions to feed through.”

Britain’s biggest supermarkets recently said they were keeping food prices as low as possible in response to questions from UK politicians on whether they’re profiteering from rampant inflation on groceries.

“We are acutely aware of the pressure that many millions of ordinary people have come under as a result of this cost-of-living crisis and food inflation in particular,” David Potts, chief executive of Morrisons told politicians on the House of Commons Business and Trade Committee.

Inflation is remaining above more than four times the target rate for the past 14 months in the UK. That is putting the promise of Prime Minister Rishi Sunak to halve inflation this year, one of his five core pledges to voters, at risk.

The government has reportedly already abandoned plans for voluntary price caps on groceries after broad opposition from the industry. M&S chairman Archie Norman called the idea “hare-brained” while Stuart Rose, chairman of Asda, said interventions would be “clumsy.”

But supermarkets have said falls in prices are coming.

“Tesco has said we will really see an ease in inflation. It says future prices are not going to be lower, but the rises in prices are going to be a lot slower,” said Ms Coles.

However, change will remain slow.

“We shouldn’t expect it to change overnight. That change will be cumulative,” said Ms Coles.

“So over time, we will really see things ease off.”

Updated: July 24, 2023, 12:35 PM