The rate of inflation in the UK remained stable at 3.8% last month amid signs that food price rises are starting to moderate.
Transport made the largest upward contribution to September’s CPI figure published by the Office for National Statistics (ONS), while recreation and culture, and food and non-alcoholic beverages made the largest offsetting downward contributions.
The overall rate was also 3.8% in July and August, which is still much higher than the Bank of England’s 2% target. However, the economists had forecast inflation to rise to 4% in September.
The inflation rate for food and non-alcoholic drinks eased to 4.5%, from 5.1% in August, marking the first time since March that the figure has slowed. On a monthly basis, prices in the sector fell by 0.2% in September, compared with a rise of 0.4% a year ago. The ONS noted that this was the first time since May 2024 that prices had fallen on the month.
There were small downward effects from 5 of the 11 food and non-alcoholic beverages classes covered by the analysis, including vegetables, milk, cheese and eggs (particularly cheese), bread and cereals, fish, mineral waters, soft drinks, and juices. However, the cost of items such as red meat and chocolate continued to rise.
James Walton, Chief Economist at IGD, stated that the data aligned with its predictions that food inflation will now start to moderate, having recently peaked. However, he noted that while this is good news, prices for shoppers are still going up year-on-year, just more slowly. “This means food price inflation is outstripping the general cost of living, which is at 3.8%,” he said.
“Food and drink prices remain a significant problem for a lot of households, and we will continue to see this being reflected in muted shopper confidence and careful shopping behaviours.”
Walton added: “Categories such as red meat, coffee and chocolate are still seeing strong price increases. This is due to production issues, such as bad weather in exporting nations and local supply restrictions in the UK. Meanwhile, inflation has undershot expectations for grain, due to good stocks from last year and plentiful international supply.
“Looking ahead, food and drink businesses will be turning eyes to the Autumn Budget to understand how announcements will affect the cost of doing business, including labour costs and business rates.”
NAM Implications:
- Key issue remaining is that consumers are motivated by ‘perceived inflation’,
- i.e. ‘personal shopping experience appears to indicate that individual product prices are rising faster than ONS figures…
- …in a climate of distrust.
- i.e. a low trust rebuilding is required before uncertain consumers begin to loosen their purse-strings…
