Inflation fear as food prices hit record highs

Inflation fear as food prices hit record highs

4 Jan    Finance News, News

Food prices rose by a record 13.3 per cent in December, increasing fears that inflation may not fall as sharply in 2023 as central bankers and economists hope.

The war in Ukraine led to sustained rises in the cost of animal feed, fertiliser and energy that squeezed supplies as demand rose, according to the latest monthly shop prices index published by the British Retail Consortium and NielsenIQ. It is the highest level recorded since the index began in 2005.

The biggest rise was in sugar, a result of delayed harvests worldwide and restrictions on export volumes from India. Lamb and pork prices also leapt over the festive period, with producers struggling to meet demand.

Alcoholic drinks suffered the biggest slowdown in price growth of all food and drink items monitored by the BRC as retailers tried to clear stocks with Christmas discounts.

A slowdown in non-food prices growth meant that overall shop price inflation was a fraction lower at 7.3 per cent, down from the record 7.4 per cent recorded in November.

The shop prices index is based on a basket of 500 essential goods, half of which are food items. It does not include utilities, fuel or any other categories that are included in calculating the consumer prices index, the headline measure of inflation. CPI is thought to have peaked at 11.1 per cent in October, when Britons received their winter energy bills. It fell further than expected to 10.7 per cent in November.

Helen Dickinson, chief executive of the British Retail Consortium, said: “It was a challenging Christmas for many households across the UK. Not only did the cold snap force people to spend more on their energy bills, but also the price of many essential foods rose as reverberations from the war in Ukraine continued to keep high the cost of animal feed, fertiliser and energy.

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“Non-food price rises eased as some retailers used discounting to shed excess stock built up during the disruptions to supply chains, meaning some customers were able to bag bargain gifts. The combined impact was that price increases overall plateaued, with the reduction in non-food inflation offsetting the higher food prices.”

Dickinson urged the government to support businesses with their energy bills past April, when the present scheme ends, to avoid further price rises for consumers.

Mike Watkins, head of retailer and business insight at NielsenIQ, said that consumers were unlikely to feel better about their personal finances in the coming months as they dealt with delayed bills for Christmas spending and another jump in energy prices in spring.

“With shoppers having less money to spend on discretionary retail after paying for their essential groceries, there will be little to stimulate demand across the non-food channels,” he said.

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