Bulletin: New policies and the Taylor Swift effect

Lower food prices

Food and drink inflation continues to decline from 1.7% in May to 1.5% in June, which is the lowest rate since October 2021. Prices of meat fell this year, having risen last year. Fruit prices fell faster than last year.

IGD’s NEW forecasts predict that food and drink inflation will be between 1.1-3.1% during 2025.

See the full details of our food inflation forecasts and how this differs by category.

See our latest article, Food inflation: are we finally in the clear?

IGD opinion
Falling food inflation has helped to bolster shopper confidence over recent months, but it may be too soon to breathe a sigh of relief. Inflation may yet reassert – IGD expects that food price inflation, which is currently falling, will stabilise within the next few months.

Even if inflation does reverse, many household budgets remain under pressure from other quarters, especially housing costs, debt and taxes. So, whilst the economic environment for food businesses in the UK is improving, somewhat, it remains very difficult for now.

Inflation – Taylor Swift effect

The latest data from ONS shows that all items inflation remained stable at 2% year-on-year in June when measured by the CPI method. The largest upward movement came from restaurants and hotels. Price rises for hotels and restaurants came at the same time as the Tayor Swift concert tour in the UK.

King’s Speech – new policies

The King’s Speech included a package of bills aimed at growing the economy through better transport, more jobs, building houses and better infrastructure. Some of the key bills include:

• The Tobacco and Vapes Bill, originally tabled by the previous government will introduce a ban on the purchase of cigarettes for anyone born after January 2009

• The Skills England Bill will set up a new body to partner with employers to generate skills required across the economy

• The Employment Rights Bill will ban ‘exploitative’ zero-hours contracts and strengthen workers’ rights as was set out in the New Deal for Working People, ahead of the election

See our latest article for more details on the key bills and understand what this means for the food system.

Wage growth slows

The ONS has reported that pay is rising at its slowest rate in almost two years. The average UK wage increased by 5.7% year-on-year (seasonally adjusted, including bonuses) for March-May 2024. Wage growth in real terms, taking account of declining inflation, is at its highest rate in over two and half years.

IGD opinion
This wage growth data will add to the speculation on the timing of when the Bank of England will cut interest rates. Central banks may be reluctant to cut rates ahead of their peers in other countries since lower rates tend to drive investment funds out of the economy, depressing currency value and possibly leading to renewed inflation pressure.

Unemployment and inactivity

The latest data from the ONS shows a cooling labour market with unemployment at 4.4% for March to May 2024.  This is up on the last quarter and up on the year. Vacancies decreased for the 24th consecutive period to 889,000. This has been led by retail and hospitality. Inactivity was a little lower at 22.1%.

Faster growth

The International Monetary Fund (IMF) has increased its expected growth for the UK economy for 2024 from 0.5% to 0.7%. The 1.5% expected growth rate for 2025 remains unchanged.