Middle East conflict
Tensions remain high in the Middle East following the large-scale attack by Iran on targets in Israel. This has not yet created broad price or availability issues for UK food and grocery businesses. There has not been any significant increase in the price of Brent Crude Oil. However, any further conflict could further disrupt supply chains and increase oil prices.
See our full analysis.
Lower food inflation
Food price inflation declined again from 5.0% to 4.0% in March. This remains a little below IGD’s most recent forecast. The biggest contribution to this slowdown in food and drink inflation was from meat and cereal products, due to lower commodity prices beginning to feed through to consumers.
See our full analysis.
Declining inflation
New ONS data shows that “all items” inflation declined from 3.4% to 3.2% in March 2024, using the CPI method. This is the lowest level for two and a half years. The strongest downward pressure came from utilities and motor fuels. However, “services” inflation is still relatively high.
IGD Viewpoint:
Despite the reduction in inflation, the headline rate remains above the target rate of 2%. With wage growth still strong, the Bank of England Monetary Policy Committee is likely to maintain a fairly tight policy for a little longer. This will impact how quickly they are willing to reduce interest rates.
Wage growth slowing
Annual average wage growth continues to slow to around 5.5% year-on-year. However, wage growth has exceeded inflation for 8 months. This is helping some consumers to rebuild recent losses to their spending power.
IGD Viewpoint:
While this is welcome news, many consumers are still struggling financially. Many will prioritise paying back increasing debts before they can focus on increasing spend on food and groceries.
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Vacancies and unemployment
Vacancies declined to 916,000 in the period January to March 2024, a decrease of 13,000 from the previous year. Vacancy numbers fell on the quarter for a record 21st consecutive period, the longest run of falls ever recorded. However, vacancies remain 120,000 higher than their pre-pandemic level.
The unemployment rate increased to 4.2% between December and February 2024. This is the highest rate for six months.
IGD Viewpoint:
Labour supply issues remain with skills shortages and flatlining productivity being key areas to address. It is vital to attract a new generation of motivated workers and develop the necessary skills for the future economy. The food and consumer goods industry can play a key role in addressing many of these issues.
Sector attractiveness
The Food and Drink Sector Council Workforce Sub Committee is developing an industry-wide campaign, spearheaded by IGD, to boost sector attractiveness. This is enabling much greater collaboration between industry, government and trade associations.
See our article for more details including how your business can get involved.
Growth forecast
The International Monetary Fund has downgraded its forecasts for UK economic growth. It now expects the UK’s GDP to increase by 0.5% in 2024 compared with a global growth of 3.2%. Growth in the UK is forecast to be 1.5% in 2025.