Economics bulletin 21 April

Date : 20 April 2023

Your overview of economic and policy news with a focus on the food and consumer goods industry. Featuring the latest developments and guidance on the rising cost of living, disruptions to supply chains, the Ukraine crisis, labour shortages, policy developments and adapting to a new relationship with the EU.

Time to plan for a weak recovery?

With a recession no longer expected, food inflation forecast to decline slowly and consumer sentiment nudging up, now is the time for businesses to re-focus, moving away from crisis management to planning for a weak recovery and building resilience.

This is one of key findings in our latest Viewpoint report: Time to plan for a weak recovery? Read the full report or download our one page Executive Summary to understand our views on the economy, changing consumer sentiment and developments in government policy.

Food inflation hits 45 year high

Year-on-year CPI inflation for food and drink in March was +19.1%, up significantly from +18% in February. Food inflation is now very slightly above the peak outlined in IGD’s latest food inflation forecasts. We predict that food inflation will begin to fade over 2023 reaching 8% by the end of the year.

Overall inflation still above 10%

The UK’s overall CPI inflation remained stubbornly high, at 10.1% in March 2023. Inflation has been declining slowly since its peak in October 2022 at 11.1%. The downward movement in inflation is primarily due to falling fuel prices but this was partially offset by the rise in food price inflation.

For further insight, please see here.

Labour market remains resilient

The UK labour market continues to perform strongly, in spite of the poor economic environment. Vacancies continue to fall, and employment is rising.

The number of those defined as economically inactive has been falling slowly since July 2022. Compared to the previous 3-month period, around 66,000 people have left economic inactivity, primarily driven by 16–24-year-olds moving into the labour market.

Read our article here for in-depth analysis.

Real pay continues to fall

The growth rate in average weekly earnings between December 2022 to February 2023, excluding bonuses, rose strongly to 6.6% year-on-year. Average wages, after adjusting for the impact of inflation, continues to fall. Using the wider RPI measure of inflation, real wages are now down 7.6% year on year.

See here for more analysis.

Scottish Deposit Return Scheme Delay

The Scottish Deposit Return Scheme has been delayed by seven months until 1st March 2024. Over the intervening period, the Scottish Government plans to work with businesses and address concerns. Further details on the planned next steps are expected.

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