UK food prices propping up shopping costs

 
Ben Southwood
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FOOD prices remained well above their December 2011 levels last month, despite creeping down marginally compared to November.

The annual rate of food price inflation was 4.1 per cent in December, the British Retail Consortium (BRC) said this morning, down from 4.6 per cent in the year to November. This fall comes off the back of a 0.1 per cent fall in food prices between November and December – rare respite for consumers after the steady rises of the last year.

BRC boss Helen Dickinson put the easing down to less heat in the commodities markets, though she warned that past shocks to inputs were still filtering through the system, and some of the adverse affects of bad weather were still to be felt in shops.

Dickinson’s story was supported by figures showing that corn prices were down 6.3 per cent in December, compared to November, while wheat prices fell 2.8 per cent, and soya beans cost 4.9 per cent less. All three commodities are both staples for humans and key food sources for livestock.

Though the pace of food price hikes steadied, the overall shop price inflation rate was flat compared to November, continuing to show inflation running at 1.5 per cent over the year. This was due to an increase in the rate of change for non-food prices – in December they were completely flat compared to the same month in 2011, up from the 0.3 per cent deflation the industry endured during the year to November.

This extremely flat picture in non-food – unattractive for the industry but appealing to the consumer – looks to be driven by an extremely tough market where demand comes from canny bargain-hunters. Mike Watkin at Nielsen, which co-authored the data with the BRC, said firms were forced to offer “significant savings” to lure “savvy shoppers” into the market. And data released by the BRC yesterday, showing only marginal increases in both food and non-food like-for-like sales over the year, reinforces this perspective.