British Retail Consortium flags food inflation decline driven by bread and cereals

27 Feb 2024 --- Food inflation in the UK decelerated to 5% in February, down from 6.1% in January, highlights the British Retail Consortium (BRC). Easing supply chain pressures have begun to feed through to food prices, but significant uncertainties remain as geopolitical tensions rise, flags BRC chief executive Helen Dickinson.

However, prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope, she flags. 

Retail relief
Offering UK shoppers some relief from a drawn out inflationary period, this figure (5%) is below the three-month average rate of 6% and is the tenth consecutive deceleration in the food category.

Inflation is currently at its lowest since May 2022, down from 8% in December and a recent high of 19.2% in March 2023, which was the highest annual rate seen for over 45 years.

Inflation in the Fresh Food category slowed further in February, to 3.4%, down from 4.9% in January. This is below the three-month average rate of 4.6% and the lowest since February 2022.

Meanwhile, Ambient Food inflation decelerated to 7.2% in February, down from 7.7% in January. This is below the three-month average rate of 7.8% and is the lowest since July 2022.

“There was good news for consumers as shop price inflation fell to its lowest rate in nearly two years. Food prices fell month-on-month with drops in fresh food including meat, fish and fruit,” says Dickinson.

“This was driven by easing input costs for energy and fertilizer while retailers competed fiercely to keep prices down,” she highlights.

The easing of local inflation was largely driven by prices for bread and cereals.Bread and cereals prices drive down inflation
The UK’s Office of National Statistics (ONS) reveals that the easing of local inflation was largely driven by prices for bread and cereals, which fell 1.3% on the month. This was the largest fall in bread and cereals prices since May 2021.

Although the rate at which food prices are rising has slowed, they remain high.

The overall price of food and non-alcoholic beverages rose around 25% between January 2022 and January 2024, highlights ONS. In the ten years prior to this, overall food and non-alcoholic beverage prices rose by 9%.

Prices in restaurants and cafes rose by 8.2% in the year to January 2024, up from 7.7% in the year to December 2023.

As prices remain high compared with recent years, 40% of adults in Great Britain say they have spent more than usual to get what they normally buy when food shopping within the past two weeks.

This was according to those asked between 17 and 28 January 2024 as part of ONS’ latest Public Opinions and Social Trends bulletin.

The latest survey also reveals that more than four in ten (44%) adults said they were buying less food when shopping in the last two weeks.

Rising food costs was the most commonly reported reason among the 49% of adults who said their cost of living had risen compared with a month ago.

Of those, 91% said one of the reasons for their rising costs was higher food shopping prices.

Meanwhile, around one in 25 adults (4%) have reported that their household had run out of food and could not afford to buy more in the past two weeks, according to more detailed analysis from the survey covering the period October 18, 2023, to January 1, 2024.

This is similar to late autumn and winter 2022.

Prices will continue to drop
Domestically, retailers face a major rise to their business rates bills in April, determined by last September’s sky-high inflation rate. 

Dickinson underscores that April’s rise in rates should be based on the month’s inflation, and the UK Chancellor of the Exchequer, Jeremy Hunt, should use the Spring Budget to make this correction, supporting business investment and helping to drive down prices for consumers.

The BRC expects the underlying trend in prices will be downwards over the next few months. For high street retailers faced with weaker demand, keeping prices stable over the next few months will be key to encourage customers to spend.

Next to inflation, UK producers have been keeping an eye on national preparations to roll out “Not for EU” labels across commercial food and beverage products, which businesses fear may lead to additional trading complexities and costs. 

By Benjamin Ferrer