Wages in the UK are rising at unusual pace and other input costs for businesses are also rising.
Annual “all items” inflation in the UK stepped-up sharply from +2.1% in July 2021 to +3.0% in August, when measured by the CPIH method (under the slightly wider RPI measure, rates were +3.8% and +4.8% respectively).
In “food and drink”, CPIH annual inflation was +0.3% in August, meaning that these items are still becoming relatively less expensive, when compared with overall living costs and with wages.
However, food price inflation was negative for the previous nine months, so the latest data may indicate that rising business costs are now beginning to pass-through to shoppers. More data will be needed to establish that this is a new trend, however.
It is also worth noting the sudden spike in inflation at foodservice in August 2021. This is likely to be primarily because of the Eat Out To Help Out scheme in August 2020, which creates unusually low comparables for the latest month.
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