UK food inflation falls in May, raising hopes
price rises may have peaked
British Retail Consortium says rate fell from 15.7% to
15.4% even as rise in overall shop prices hits fresh high
Phillip
Inman
@phillipinman
Tue 30 May
2023 00.01 BST
Food
inflation in the UK fell in May, lifting hopes that the rapid increase in
grocery prices may have reached its peak after keeping the broader consumer
prices index painfully high so far this year.
After more
than a year of sharp increases in the price of food, the British Retail
Consortium (BRC) said annual food inflation eased this month from 15.7% to
15.4%, even as the overall rise in shop prices hits a fresh high.
Fresh-food
inflation, which has rocketing after spectacular increases in the price of
sausages, milk, cheese and eggs, fell from 17.8% to 17.2%.
While the
decrease in May was modest, the BRC said it indicated that food-price inflation
had peaked and was beginning to come down.
The
government is working on plans for a voluntary price cap on essential items
such as bread and milk, but the proposal has been criticised by retail groups
as ineffectual.
The Bank of
England is among several forecasters to raise its estimate for inflation in
response to predictions that food prices would remain elevated through the
summer and autumn. It now expects inflation at the end of the year to be above
5% rather than the 3% or so it previously forecast.
The BRC
chief executive, Helen Dickinson, said weaker retail prices were “largely
driven by lower energy and commodity costs starting to filter through to lower
prices of some staples”.
Dickinson
said the price of butter, milk, fruit and fish had fallen after a recent trend
that was accelerated by “fierce competition” among UK supermarkets. This had
kept “British food among the cheapest of the large European economies”, she
added.
The BRC
represents a wide range of UK retailers, including the main supermarket chains.
Dickinson
said a rise in the price of chocolate and coffee because of “high global costs
for these commodities” prevented food inflation from falling further.
However,
the BRC warned the government that Britain’s dependence on food imports from
the rest of Europe meant that an incoming round of post-Brexit border controls
could reverse the trend.
Dickinson
said: “While there is reason to believe that food inflation might be peaking,
it is vital that government does not hamper this early progress by piling more
costs on to retailers and forcing up the cost of goods even further.
“The
biggest risk comes from policies such as the incoming border checks and reforms
to packaging recycling fees.”
New
labelling requirements under the Windsor agreement will also slow border
checks, the BRC said.
The Bank of
England is expected to increase interest rates from 4.5% to 4.75% when its
monetary policy committee meets next month as it tries to bring down CPI
inflation, which fell by less than expected in April to 8.7% after rising food
prices and the cost of business services remained stubbornly high.
Dickinson
said the fall in food inflation was offset by an increase in non-food prices
despite “consumers benefiting from heavy discounts in footwear as well as books
and home entertainment”.
Non-food
inflation hit 5.8% in May, up from 5.5% in April and above the three-month
average of 5.7%. Overall, retailers increased prices by 9%, up slightly from
8.8% in April, pushing shop price growth to a fresh high.
Mike
Watkins, a spokesperson for the survey compiler NielsenIQ, said feedback from
retailers showed that to help mitigate the impact of inflation, shoppers were
“saving money by looking for seasonal promotions on the high street and taking
advantage of the price reductions offered by supermarket loyalty schemes”.
He said:
“Food retailing in particular is competitive, so hopefully the recent price
cuts in fresh foods are a sign that inflation has now peaked.”
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