Record levels of UK food price inflation driven by staples, bread, meat and oils
22 Jun 2022 --- The Office for National Statistics (ONS) has reported a 9.1% rise in UK inflation for the Consumer Prices Index (CPI), the highest level in decades with food price inflation in particular being driven up by staples such as bread and cereals, meat, oil and fats.
In addition, the 12-month CPI growth rate has risen sharply to 7.9% for the Consumer Prices Index, including owner occupiers’ housing costs (CPIH), with the most significant contributions seen between April and May.
Food and non-alcoholic beverages have increasingly put upward pressure on the 12-month growth rate of CPIH in recent months, with all categories seeing prices increase. Around 60% of adults report spending less on non-essential items in response to rising costs.
Drivers of inflation veer off track
Over recent months, the biggest drivers of consumer price inflation have been food and non-alcoholic beverages, housing, water, electricity, gas and other fuels and transport.
These components collectively account for more than 50% of the CPIH basket by weight and contain many essential items for which a certain amount of consumption is required.
Food price inflation is driven up by staples including oil and fats.
Price growth for housing, water, electricity, gas and other fuels has primarily been driven by energy since the Ofgem price cap rose in April. The ONS reports that prices for electricity, gas and other fuels rose by over 46% between March and April, rising slightly again in May.
Measuring expenditure patterns
High inflation affects different households differently depending on various factors, including their expenditure patterns and ability to absorb increased outgoings.
Transport has contributed more to rising inflation for higher-income than lower-income households over recent months. This resulted in households in the ninth income decile seeing higher inflation rates than those in the second income decile at the end of 2021, measured by the Household Cost Indices (HCIs).
There has been considerable volatility over the period and, at times, significant variation in the experience of those on the lower and higher end of the income scale. Inflation for higher and lower-income households has been rising in both the CPIH and HCI measures.
There is a difference in extent between higher and lower-income households in the HCI measure, which shows that households in the ninth income decile saw an HCI 12-month growth rate of 6.5% in December 2021, compared with a rate of 5.6% for those in the second income decile.
Cereals is another driver of food price inflation.
Transport a determining factor
The estimates of inflation by income decile use data from the Living Costs and Food Survey (LCF) to weight the expenditure of different households and derive inflation rates accordingly.
Transport has experienced significant consumer price inflation over recent months, with motor fuels putting selective upward pressure on the annual growth rate. In May, rates for petrol and diesel reached 32.8%, the highest the rate has been since the constructed CPI series began in 1989.
Food companies have felt the onslaught of supply chain issues such as the high cost of fuel. These factors are making it harder for premium nutrition brands, for example, to retain customers.
Data from the Producer Price Index show that crude oil and petroleum products have seen even higher price growth over recent months.
By Inga de Jong
