The rate of inflation in the UK was unchanged last month after an increase in the cost of energy was offset by the first fall in food prices in more than two years.
Data from the Office for National Statistics (ONS) shows the consumer price index (CPI) rose by 4.0% in the year to January, the same rate as the previous month.
The cost of food and non-alcoholic beverages fell on a monthly basis by 0.4%, marking the first decrease since September 2021 and the largest fall since July 2021.
The annual rate of food and drink inflation also eased for the tenth month in a row, slowing from 8% in December to 7% last month – the lowest since April 2022.
The easing in the annual rate was driven by ‘bread and cereals’, where prices fell by 1.3% on the month, compared with a rise of 0.2% a year ago. Of the 11 classes analysed by the ONS, 7 provided a downward contribution, while the others were unchanged. Some of the items providing the largest negative contributions included crisps, cooking sauces, and instant coffee.
However, the ONS noted that food costs remain exceptionally high following sharp rises over the past two years, with the overall prices up by about 25% between January 2022 and 2024, which compares to a 10% hike over the previous 10 years.
Meanwhile, inflation in alcohol and tobacco eased from 12.8% to 12.2%.
Balwinder Dhoot, director of sustainability and growth at the Food and Drink Federation (FDF), warned that the challenges caused by the disruption of the Red Sea trading route and rising shipping costs could soon exert pressure on food prices.
“The extent of this impact hinges on the duration of ship diversions from the Suez Canal and any escalations in the Middle East,” he said.
“We are also seeing increased regulatory costs being put on industry by government. To support food and drink manufacturers and help hard-pressed shoppers, the government must reduce unnecessary regulatory burdens and urgently reassess costly ‘not for EU’ labelling requirements for food sold in Great Britain.”
NAM Implications:
- The key is at what rate of inflation will the UK consumer feel comfortable in spending their limited discretionary cash?
- It still feels somewhat distant…
- …in a world where trust was the biggest casualty of Lockdown.
