Fear of inflation due to food prices reaching record level

Food prices rose by a record 13.3 percent in December, raising fears that inflation may not fall as sharply in 2023 as central bankers and economists expect.

According to the latest monthly shop price index published by the British Retail Consortium and NielsenIQ, the cost of animal feed, fertilizer and energy continued to rise due to the war in Ukraine, with demand outstripping supply. This is the highest level recorded since the index was launched in 2005.

The biggest increase was in sugar as a result of delayed harvesting worldwide and restrictions on export volumes from India. Lamb and pork prices also jumped over the festive period, as producers struggled to meet demand.

Alcoholic drinks suffered the biggest slowdown in price growth of all food and drink monitored by the BRC as retailers tried to clear stocks with Christmas discounts.

A slowdown in growth in non-food prices meant that overall shop price inflation eased to 7.3 per cent from a record 7.4 per cent in November.

The Shop Price Index is based on a basket of 500 essential commodities, half of which are food items. It does not include utilities, fuel or any of the other categories that are included in the calculation of the Consumer Price Index, the headline measure of inflation. The CPI is believed to have peaked at 11.1 per cent in October, when Britons received their winter energy bills. It fell more than expected to 10.7 per cent in November.

Helen Dickinson, chief executive of the British Retail Consortium, said: “It was a challenging Christmas for many households across the UK. Not only did the cold snap force people to spend more on their energy bills, but many essential food items The price also increased as the cost of animal feed, fertilizer and energy remained high due to the reverberations from the war in Ukraine.

“The rise in non-food prices was moderate as some retailers used discounts to reduce excess stock built up during supply disruptions across chains, meaning some customers were able to get bargain goodies. The combined effect was that price growth stabilized overall, with higher food prices offsetting a reduction in non-food inflation.

Dickinson urged the government to support businesses with their energy bills last April when the current scheme expires, to avoid a further increase in prices for consumers.

Mike Watkins, head of retailer and business insight at NielsenIQ, said consumers were unlikely to feel better about their personal finances in the coming months as they brace for delayed Christmas spending bills and another jump in energy prices in the spring. were dealing with.

“With shoppers having less money to spend on discretionary retail after paying for their essential groceries, there will be little to stimulate demand in non-food channels,” he added.

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