The City forecasts that UK food price inflation will reach 20%

On January 15, 2021, people buy skyscrapers in the London Financial District in London, Britain. REUTERS / Toby Melville

LONDON, June 22 (Reuters) – Britain’s food price inflation is set to hit 20% in the first quarter of next year, US Bank City forecasts on Wednesday, after the latest official figures suggest further hikes in the pipeline.

Overall consumer price inflation hit a 40-year high of 9.1% in May, as food costs – especially for bread and meat – took off from rising energy prices as a key driver of the recent increase in CPI. Read More

While the Russian invasion of Ukraine disrupts the supply of grain and vegetable oils, food prices have become more widespread due to poor weather and rising fuel prices, which have increased fuel, transport and fertilizer costs.

Customers paid for food and non-alcoholic beverages in May rose 8.7% from a year ago – their biggest increase since March 2009 – and manufacturer ingredient costs are rising even faster.

The prices paid by manufacturers for domestic food items increased by 10.3%, but the cost of imported food – which is half of Britain’s consumption – increased by 20.5%, the largest increase since December 2008.

“Food inflation exceeds our forecasts. We expect price growth to be slightly above 20% in Q1 2023, with producer price inflation continuing to accelerate here,” City economist Benjamin Nabarro wrote in a note to clients.

Last week, industry forecasters for the Institute for Grocery Distribution (IGD) predicted that food price inflation would rise 15% in the coming months, and some families were already skipping meals. Read More

Rising food prices are a particular concern for Britain’s poorest families, who spend most of their income on meals. Supermarkets reported trading shoppers to cheaper tiers. Read More

The City said that rising food prices could put more pressure on wage demands than other forms of inflation – a concern for some officials of the Bank of England, who fear that big wage increases could secure inflation.

Report by David Milliken

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