The rise in the cost of food and drink is set to reach a peak rate of 17-19% in early 2023, before slowing over the subsequent 12 months.
This is according to the latest data released by IGD as part of its quarterly Viewpoint report series and presented at its Insight & Impact 2022 event, held in London today.
In June of this year, IGD calculated that food price inflation would likely accelerate until autumn 2022, peaking at 14-16%, then dissipating by mid-2023.
However, the industry organisation noted that major strategic changes have affected the food supply chain since June, including significant input cost pressures, a tight labour market, continued supply chain disruption and the ongoing war in Ukraine. The outlook for food price inflation has therefore worsened, leading to IGD’s revised forecast.
As before, the bulk of inflation pressure on households is likely to come from four major product categories: meat, fruit and vegetables, dairy and bread.
Inflation is expected to remain above zero at the end of 2023, although price reductions may occur beyond that point if market conditions permit. IGD noted that harvests in 2023 and the value of sterling will be key factors.
James Walton, the group’s Chief Economist, said: “There is no doubt about it that this is a daunting prospect for both households and businesses. Already we can see the food industry pulling together and retailers putting themselves in the shoes of shoppers to understand how best they can support them during this difficult time.
“Whilst it’s clear that there are considerable global and UK-specific economic headwinds ahead, there is some light at the end of the tunnel, with food inflation expected to dissipate slowly during 2023.”
Source: ONS and IGD calculations, November 2022
Walton added: “Consumers will be looking to the food industry to keep prices affordable. We know that inflation will eventually come to an end, and we will start to see significant drivers of overall inflation begin to drop off over the coming months.
“Food businesses will need to focus on maximising efficiency to deliver the best possible prices for shoppers and look for opportunities to bring prices back down, as soon as possible.”
