UK food inflation normalizes but geopolitical conflicts threaten future price stability

30 Apr 2024 --- The British Retail Consortium (BRC) has revealed that UK food inflation is beginning to normalize and is likely to continue slowing if global food prices and domestic producer costs remain stable. However, geopolitical upheavals will continue to threaten future price stability.

The lead trade association for UK retail reports that food inflation decelerated to 3.4% in April, down from 3.7% in March. This level is below the three-month average rate of 3.9% and the 12th consecutive deceleration in the food category. Food inflation is at its lowest since March 2022.

Moreover, Shop Price annual inflation eased to 0.8% in April, down from 1.3% in March and below the three-month average rate of 1.4%. Shop price annual growth is at its lowest since December 2021.

According to Harvir Dhillon, economist at BRC, food inflation in the UK will likely continue falling to the early single-digits.

“Input costs for businesses have eased considerably, and a key component in producing food — fertilizer — has seen prices return to more manageable levels for food producers. Hence, prices up and down the supply chain have broadly settled, albeit at a much higher level than before the pandemic,” he tells Food Ingredients First.

“Food inflation is likely to continue slowing. These trends are broadly similar in other European countries, though the UK’s rate of food inflation remains marginally elevated.”

Food inflation in the world’s wealthiest nations has fallen to levels from before Russia’s full-scale invasion of Ukraine and declined for 15 consecutive months, according to the latest report from the Organisation for Economic Co-operation and Development.

However, certain food products, such as olive oil and chocolate, continue to experience inflationary pressures globally.Geopolitical crises, notably the war in Ukraine, remain threats to future price stability in the UK and worldwide.

Future price stability
One year on from the UK’s peak Shop Price inflation, levels are showing signs of normalizing and bringing relief to households. However, BRC warns that geopolitical crises, including the war in Ukraine and the Red Sea shipping crisis, remain threats to economic stability.

“Both Food and Non-Food have seen shop inflation rates ease to more manageable levels. Food inflation slowed for the 12th consecutive month, as fresh products such as butter, fish and fruits, continued to fall in price due to easing input costs and intense competition between grocers,” says BRC’s CEO Helen Dickinson.

“While consumers will welcome the lower shop price inflation, geopolitical tensions and the knock-on impact on commodity prices, like oil, pose a threat to future price stability.”

“Retailers will continue to do all they can to keep prices down, but the government has a role to play with pro-growth policies that allow businesses to invest in the customer offer.”

In the UK, Fresh Food inflation slowed further in April to 2.4%, down from 2.6% in March and the lowest since November 2021. Ambient Food inflation decelerated to 4.9% in April, down from 5.2% in March and the lowest since June 2022.

Non-Food entered deflation at -0.6% in April, down from 0.2% in the preceding month and below the three-month average rate of 0.2%. Non-Food inflation is at its lowest since October 2021.

“There remain upside risks to the future trajectory of commodity prices, especially crude oil, which could mean inflation is pushed back up over the second half of the year,” Dhillon tells us.

By Joshua Poole

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