Food and drink inflation increases significantly
19 August 2022The latest inflation data from the ONS reveals that inflation has hit its highest level for 40 years.
The latest inflation data from the ONS reveals that inflation has hit its highest level for 40 years. Rising food and drink prices are now the largest contributor to inflation.
ONS has released its latest inflation data covering July 2022. This shows that year-on-year inflation level has reached another record high, recording 10.1% on the CPI index and 8.8% on the CPIH index. The older RPI measure of inflation reached 12.3% up from 11.8% in June.
On a monthly basis, inflation has increased significantly in July, up 0.6 percentage points on the CPI measure. This is principally due to rising food and drink prices, which was the largest upward contributor to inflation in July.
As shown in Figure 1, price rises in ‘food and drink’ accelerated dramatically in July, up 2.3 percentage points in June to 12.7% year on year. This is the highest monthly increase in prices since 2001.
Food prices are now rising at a faster rate compared with other goods and services, and with no sign of the momentum slowing.
Food price inflation of 12.7% is slightly behind IGD’s forecasts for food price inflation at this point of the year although it is clear that inflation still has a long way to run.
Inflation is being largely driven by supply-side factors, especially energy and fuel prices. This is eroding food production margins, as illustrated in the chart below. Input prices for food producers stabilized slightly in July, up a further 0.2%.
The gap between input and output prices remains wide, and IGD expects these margin pressures to continue to feed into retail prices in the coming months.
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