Economics bulletin 26 May

Date : 25 May 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 peak

Year-on-year CPI inflation for food and drink in April was +19.0%, marginally down compared to +19.1% in March. This still represents one of the highest levels in 45 years. This broadly aligns to IGD’s forecast and may indicate that food price inflation has peaked. IGD believes that food price inflation will gradually begin to slow as 2023 progresses.

Find out more from IGD’s next economic Viewpoint report, which will be released on 8 June, exploring what’s next for food inflation.

See here for our full analysis.

Overall inflation declines to 8.7%

The UK’s overall CPI inflation declined to 8.7% in April compared to 10.1% in March 2023. This is the first time inflation has been below 10% since August 2022. The downward movement in inflation is primarily due to falling electricity and gas prices but this was partially offset by food price inflation.

Economic growth boost

The International Monetary Fund (IMF) has forecast that the UK economy will grow by 0.4% in 2023. This represents an upgrade compared to the previous prediction of a contraction of 0.3%. This is due to “resilient demand” and declining energy prices. However, the IMF warned about the “greater than anticipated persistence in price and wage setting” would keep inflation higher for longer.

Energy price cap to be lower

Ofgem has confirmed that the Energy Price Cap will decline to £2,074 for the period 1 July-30 September for a dual fuel household paying by direct debit based on typical consumption.

The Government’s Energy Price Guarantee which limits bills for a typical household for gas and electricity at about £2,500 per year will end at the end of June.

Availability concerns ease

In the latest consumer research conducted for IGD (17-18 May 2023), two thirds of adults (64%) experienced shortages of some food and groceries in-store or online recently. This has declined sharply, by 10%, since last month.

Availability concerns have declined for fresh produce and dairy.

See here for our analysis.

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