Official data shows that food prices in the UK saw their first monthly fall in two years in September, although higher fuel costs meant that the overall rate of inflation held steady at 6.7%, ending a run of three consecutive falls.
The analysis by the Office for National Statistics (ONS) showed food and non-alcoholic drinks prices fell 0.1% between August and September, compared with a 1.1% rise in the same period a year ago. This resulted in an easing in the sector’s annual rate to 12.2% in September, down from 13.6% in August and a recent 45-year high of 19.2% in March.
With some commodity costs falling, the largest downward contributions came from the milk, cheese and eggs, and mineral waters, soft drinks and juices categories. The only class to provide an upward contribution was fish, driven by a hike in the cost of frozen prawns.
Inflation also eased in areas such as clothing and furniture amid fierce competition between retailers. However, recent rising prices for motor fuel meant there was no further fall in the overall Consumer Prices Index (CPI).
Analysts had expected the rate of inflation to come down slightly, and the ONS said there may be “some disappointment” about the unchanged figure. However, its Chief Economist Grant Fitzner noted that many countries across Europe had either seen periods lately of no change or, in some cases, actual increases in the headline rate, before they started to resume their falls.
A big drop in the inflation rate is tipped for the month of October, when shifts in the energy price cap will be reflected in the data.
Since 2021, the Bank of England has put up interest rates repeatedly to tackle inflation. However, it left rates on hold last month, with many economists expecting rates to remain unchanged again next month. However, analysts said the mixed picture painted by September’s inflation numbers means this is no longer certain.
NAM Implications:
- Heading into winter, fuel bills are keeping inflation at 6.7%…
- …meaning that consumers will hesitate in relaxing their reluctance to spend…
- …compounded by Bank of England rises in interest rates.
- In turn, this means that any sales growth will be at the expense of rivals.
- i.e. key for suppliers and retailers to realistically define their relative competitive appeal.
