Economics bulletin 18 August

Date : 17 August 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, the Ukraine crisis, labour shortages, policy developments and adapting to a new relationship with the EU.

Food inflation declines significantly

Year-on-year CPI inflation for food and drink declined by 1.5 percentage points to 14.8% in July.

This is marginally lower than our latest food inflation forecasts. Our forecasts indicate that food inflation has now peaked and will decline slowly over 2023. In December 2023 food inflation is predicted to be between 8% and 10%.

To read our full analysis on what is next for food inflation and how consumers are faring, download our latest Viewpoint report “Persistent inflation, politics and labour challenges”.

Overall inflation falls

The UK’s overall CPI inflation declined to at 6.8% in June 2023. This is a fall of 1.1 percentage points.

“Core” inflation, which excludes the most volatile items such as energy, food, alcohol and tobacco, remained flat at +6.9%. This is just below the peak of core inflation of 7.1% in May, which was the highest level in 30 years.

“Core” inflation rate has remained high for the past 3 months and is not showing signs of fading away. This may indicate that record wage rises are having an impact in slowing the decline in inflation, but not necessarily significantly driving price rises yet.

See our article on inflation for our full analysis.

Pay growth reaches parity with inflation

Average weekly earnings (excluding bonuses) were up 7.8% year-on-year in June. This is the highest growth rate on record since comparable records began in 2001.

Pay growth has moved back in line with inflation. Real wages are no longer in decline. However, it will take a significant amount of time for workers’ incomes to recover back to their positions before the cost-of-living crisis.

See our article for our full analysis.

Inactivity due to long term sickness increasing

The UK labour market continues to show signs that it is slowly cooling off. The employment rate fell to 75.7% and unemployment continued to rise to 4.2% in the period from April 2023 to June 2023.

The number of economically inactive adults fell by 0.1 percentage points on the quarter to 20.9%. However, since the pandemic, there has been an increase in the number of those economically inactive due to sickness and this has reached a record high of nearly 2.6 million this month.

To read further analysis, see here.

Pubs to continue selling takeaway drinks

Pubs in England and Wales will be able to continue selling takeaway drinks until March 2025, following the extension of COVID licensing rules.

The rules allow pubs that do not have an off-premises license to sell takeaway alcoholic drinks without having to apply for permission.

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