Food prices to jump despite easing inflation predictions
Food prices are projected to jump higher despite economists’ predictions of easing inflation, according to a fresh survey, which warned that soaring energy prices and taxes were exacerbating the cost of living for Britons.
New data by the British Retail Consortium has suggested that food price inflation could rise at a faster pace, weighing heavily on people’s price expectations for the next year.
It said shop price inflation increased 1.5 per cent year-on-year in January compared to just 0.7 per cent last month.
BRC researchers also recorded food inflation of 3.9 per cent this month, which was also higher than the 3.3 per cent figure for December.
Fresh food inflation rose 4.4 per cent on the year in what the BRC’s chief executive Helen Dickinson suggested was further evidence that inflation was not slowing down.
“Any suggestion that inflation has peaked is simply not borne out by these figures,” Dickinson said.
“Shop price inflation jumped this month due to high business energy costs and the hike to national insurance continuing to feed through to prices.
“Retailers do what they can to keep prices down in a competitive market, but thin margins and rising costs of government policy make it harder. The government must double down on costs in order to support households.”
Food prices to give Bank a headache
BRC’s industry-led data is often a marker for economists when fresh predictions are made.
It is frequently referenced in Bank of England reports alongside hard data compiled by the UK’s statistics body.
Official data earlier this month from the Office for National Statistics (ONS) showed food prices rising by 4.5 per cent in the year to December.
The biggest risers in the food basket was sugar and confectionery, with prices rising 10.2 per cent year-on-year in the year to December.
Coffee and meat prices also jumped higher, data showed.
Food inflation is closely watched by Bank of England officials given it can drive expectations about price growth among households and firms.
The Bank’s Megan Greene and chief economist Huw Pill have called attention to the risks posed by firms and households’ expectations of inflation rising at a faster pace than targets for policymakers.
In the minutes to the December decision to cut interest rates by 25 basis points, Pill said medium-term inflation expectations “exhibit a shallow saucer-shaped profile, raising concerns about a slowing or stalling in disinflation towards target”.
External member Catherine Mann also described inflation expectations as being “elevated”, which could deter her from voting in favour of more interest rate cuts this year.