Key facts
- Food inflation in the UK decreased to 1.3% in July.
- This is the lowest rate of food price inflation in nearly five years.
- Retailers are actively using discounts to protect consumers from higher prices.
- Manufacturers have adapted to supply chain and energy cost shocks.
- Droughts across Europe may lead to increased costs for food manufacturers.
Food inflation in the UK has continued to slow, reaching a near five-year low of 1.3% in July. This marks a significant decrease from 1.7% in June and is the lowest point since September 2021, defying earlier predictions that food price inflation could surge as high as 10% this year.
Retailers, represented by the British Retail Consortium (BRC), claim they are actively absorbing costs through heavy discounting on essential items to shield consumers. Harvir Dhillon, the BRC's lead economist, stated that retailers are managing inflationary headwinds and urged the government to reduce business costs, such as energy standing charges and employment costs, to allow further savings to be passed to customers.
The Food and Drink Federation (FDF), representing food manufacturers, attributed the cooling inflation to lessons learned from previous energy shocks and diversified supplier contracts. However, Liliana Danila, the FDF's chief economist, cautioned that ongoing droughts across Europe could present new cost challenges for manufacturers.
While the overall food inflation rate has decreased, specific categories saw price increases, with fish prices rising by 13.6%, water by 9.9%, and preserved fruit by 8.1%. Conversely, prices fell for 16 categories, including pizza (-8.5%), butter (-5.3%), and jams and marmalades (-5.1%).