UK food inflation eased to its lowest rate for almost two years in February as meat, fish and fruit prices fell, according to industry data published on Tuesday, adding to evidence of downward cost pressure in the economy.
Annual food inflation slowed to 5 per cent this month, down from 6.1 per cent in January and the lowest rate since May 2022, the British Retail Consortium (BRC) data showed.
The slowdown was driven by “easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down”, said BRC’s chief executive Helen Dickinson.
The data will raise hopes that headline inflation, published on March 20, will continue to decline in February after remaining unchanged at 4 per cent in January.
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The BRC said food prices were down 0.1 per cent month-on-month in February, noting drops in certain fresh items including meat, fish and fruit.
Official food price inflation fell to 6.9 per cent in January, from a 45-year high of 19.1 in March 2023 when commodity costs surged after Russia’s full-scale invasion of Ukraine sent global supply chains into disarray.
As supply chains have normalised and diversified to replace imports from Russia, the wholesale costs of energy and fertiliser have eased.
The trend was confirmed by separate data from research company Kantar, also published on Tuesday, showing that the annual rate of supermarket price growth in the UK slowed sharply to 5.3 per cent in February, from 6.8 per cent in the previous month. The rate was the lowest since March 2022.
“We saw promotions accelerate this month after a post-Christmas slowdown,” said Tom Steel, strategic insight director at Kantar. “Things are looking up for shoppers this February.”
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However, the BRC also reported that non-food inflation was unchanged at 1.3 per cent, the lowest rate since January 2022. Overall, shop prices grew at an annual rate of 2.5 per cent, the lowest since March 2022.
The price of furniture, electricals as well as health and beauty products rose. But the cost of clothing in the UK continued to fall as retailers laid on post-Christmas promotions.
“Shop price inflation has slowed and the underlying trend in prices will be downwards over the next few months,” said Mike Watkins, head of retailer and business insight at NielsenIQ, which put out the survey with BRC.
The data followed the release of research by the UK’s Office for National Statistics (ONS) on Monday on the impact of price pressures on different household types. The report showed that while the poorest households bore the brunt of rising food costs, falling energy prices meant they no longer faced the highest overall inflation rate as was the case in the first half of 2023.
In December, lower-income households in the UK experienced price growth of 4.5 per cent, less than the 5.6 per cent of the higher-income group.
Households with mortgages faced the highest annual inflation rate of any socio-economic group, at 6.3 per cent in December, reflecting rising mortgage interest payments.
For private renters, the figure stood at 4.9 per cent, and at 4 per cent for outright homeowners.
“Higher mortgage costs mean those with mortgages are now seeing the highest level of inflation, and non-retirees and those with children are being hard hit,” said Sarah Cumbers, chief executive of the Royal Statistical Society.
“We urge policymakers to take note of these figures, so they are better able to understand inflation as actually experienced by households,” she added.
Price growth for working households in the UK was 5.4 per cent in December, compared with 4 per cent for those who had retired. Households with children experienced price growth of 5.5 per cent, compared with 4.8 per cent for those without children.
The second quarterly ONS household cost index is based on how much different households spend on goods and services. The headline inflation rate, by contrast, reflects price growth affecting all UK households.
– Copyright The Financial Times Limited 2024
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