Rising food costs have pushed consumer price inflation in the UK into double digits for the first time since 1982.
The CPI figure from the Office of National Statistics (ONS) hit 10.1% in the year to July, up from 9.4% in June.
Whilst energy and motor fuel costs also contributed to the figure, food and non-alcoholic drinks were the largest upward contributors to inflation last month. The ONS said annual inflation for these items was now running at 12.7%, up from 9.8% in June.
The price of bread, cereals, milk, cheese and eggs rose the fastest, while the cost of vegetables, meat and chocolate also climbed higher. And other grocery staples, such as toilet rolls, pet food and toothbrushes, became more costly.
Industry data released by Kantar put grocery price inflation at 11.6% over the past four weeks, the highest level since the research group first started tracking the data in 2008. It noted that the rise means that the average annual shop will increase by £533, or £10.25 every week, if consumers buy the same products as they did last year.
Kien Tan, director of retail strategy at PwC, commented: “Supermarkets have had little choice but to pass on price increases from suppliers, themselves contending with unprecedented inflation in raw material and ingredient input costs.
“This has been particularly acute in labour and utility intensive categories like dairy, with reports of the price of a pint of milk having more than doubled in some stores since the start of the year.”
Earlier this month, the Bank of England said inflation could peak at more than 13% this year. The rate is forecast to rise further in October when higher energy bills hit.
The UK is expected to fall into recession in the final quarter of this year and keep shrinking until the end of 2023.
Speaking to the BBC today, Lord Stuart Rose, the Chairman of Asda, called for more action to help those most in need.
“We’ve been very, very slow in recognising this train coming down the tunnel. It’s now here, and it’s not about to run us over, it’s [already] run quite a lot of people over,” he said.
The cost of living crisis is the biggest challenge facing the new prime minister in the autumn, with leadership candidates Liz Truss and Rishi Sunak clashing over what further support they would offer households facing a squeeze from surging food and energy costs.
Last week, a leading industry figure suggested that the price of bread, milk and cheese is expected to rise sharply in the coming months.
Karen Betts, Chief Executive Officer of the Food and Drink Federation (FDF), told PoliticsHome that big hikes in production costs had already forced companies to raise food prices, and that grocery bills will probably continue growing into early next year.
She said baked goods like bread and biscuits are most exposed to price rises heading into the winter because bakeries are “intense users” of ovens which rely on gas, which is becoming even more expensive. They are also “big users” of grain which Ukraine exports in large quantities worldwide.“Bakery is really feeling the pinch,” Betts told PoliticsHome.
She added that dairy products like milk, cheese and butter are also seeing significant price rises, with the price of low-fat milk increasing by around a quarter due to widespread inflation. Tinned goods are also becoming more expensive due to the growing cost of metal.
Betts stated the cost pressures were forcing some manufacturers to consider dropping certain product lines altogether to save money, leading to reduced ranges on shop shelves. She suggested that suppliers also faced having to walk away from contracts because rising costs mean they can’t afford to fulfil them.
“You have got a situation where the costs of inputs that manufacturers are buying or using to put into food are going up exponentially: energy, ingredients, materials, packaging, logistics,” Betts said.
She added that it was hard to predict how high food prices will go and when inflation will start to tail off. However, her “hunch” is that it will not peak until early 2023.
NAM Implications:
- Taking all official figures for inflation…
- …and adding the additional pressures of soaring energy prices…
- …in an increasingly uncertain climate re jobs…
- …it becomes more helpful to think about consumer perception of pocket-inflation as a real driver of shopping behaviour to explore the impact on your business.
