UK food price inflation continues to slow
15 February 2024See our analysis of the latest inflation data for food and drink and foodservice and what this means for the future
New ONS data shows that “all items” inflation was stable in the latest month. Using the CPI method, year-on-year inflation was 4.0% in January 2024, unchanged from December 2023.
The strongest upward pressure came from transport, housing and household costs, especially higher costs for utilities, following the adjustment of the energy price cap in January. This was offset by weakening contributions from clothing, food and drink as well as furniture and household goods.
Note that inflation has now been weakening for over a year, therefore month on month downward movement will become more difficult as the base for annual comparison shifts.
Food and drink inflation fell from 8.0% in December 2023 to 6.9% in January 2024, which was exactly in line with IGD’s latest forecast issued in January. Food price inflation slowed in most categories, although bread and cereals were the most influential.
Inflation in food service behaved differently, rising from 7.3% in December to 7.7% in January. One reason for this may be increasing labour costs – if so, further cost increase may take effect in April when the new National Living Wage is introduced.
IGD viewpoint: Looking ahead, there are some upside risks for inflation, but “all items” inflation is expected to continue trending downwards, probably more slowly as tougher comparables come in.
In food and drink, the picture is more uncertain, since there are more risks. These include border issues, energy prices, geo-political stresses, labour costs and weather.
On balance, IGD anticipates that food and drink inflation will also slow and eventually level off at some point before year-end. The overall cost of a typical food shop is not expected to fall in the near- to mid-term.
You can download IGD’s latest Viewpoint report, As Inflation falls, what’s in store for 2024? which includes a chapter on the outlook for food price inflation.