Food inflation 'should drop to single digits this year' after new figures show declining rates

While UK residents have recently been told to "hold their nerve" by Prime Minister Rishi Sunak over soaring interest rates aimed at bringing down inflation, some good news has come in the form of decelerating food inflation.

Households across the country have certainly felt the effects of rapidly rising prices over the past year, with food bills - alongside energy bills - the most noticeable expensive change. But new data collected by the British Retail Consortium has shown that the cost of an average shop has actually reduced month-on-month, with hope that food inflation rates could drop to single figures by the end of the year.

Helen Dickinson, OBE, Chief Executive of the British Retail Consortium, said:“Households up and down the country will welcome the easing of shop price inflation in June. Food inflation slowed for the second consecutive month, particularly for fresh products, as retailers cut the price of many staples including milk, cheese and eggs. Clothing and electrical goods also saw falling prices, helping customers to pick up a bargain ahead of the summer holidays.

“If the current situation continues, food inflation should drop to single digits later this year. However, it is imperative that Government does not hamper this progress by introducing costly new policies.

She added: "Reforms to the packaging Levy (Extended Producer Responsibility) and a new deposit return scheme, could create an additional £4bn burden on retailers and their customers. Along with a rise in business rates, and the introduction of border controls in October, these policies could hinder the Government’s efforts to combat inflation.”

How much has food inflation decreased by?

According to the BRC-NIELSENIQ SHOP PRICE INDEX, the rate of food inflation has reduced from 15.4% in May to 14.6% in the same period in June. Not only is the new level lower than the three-month average rate (which currently sits at 15.2%), but it marks the second consecutive reduction month-on-month.

Measured in different categories was fresh food and ambient food, however, both also saw a fall in inflation. Fresh food slowed from 17.2% in May to 15.7% in June, while ambient food dropped by only 0.1% to 13% to come in line with the three-month average for this category.

The overall Shop Price annual inflation also decelerated to 8.4% in June, down from 9% the previous month.

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said:“Whilst prices are still higher than a year ago, the slowdown in food inflation is welcome news for shoppers, helped by supermarkets lowering prices of some staple goods. And if global supply chain costs continue to fall, we may now be past the peak of price increases.

"However, with most households needing to save money, purchasing behaviour for the rest of this year is still likely to shift towards essential needs with discretionary consumption being deprioritised or delayed.”