Food inflation is falling. Why?

Latest data 

Inflation for food and drink has slowed in recent weeks, moving from 1.7% year-on-year in June 2026 to 1.3% in July, as measured by the CPI method. This is the lowest level for two years. 

Weaker food inflation is obviously good news for shoppers, especially as overall inflation strengthened from 2.6% to 2.9%, driven by utility prices and changes to the energy price cap. 

That said, even low-level food inflation is a serious challenge for many households, since it follows years of economic headwinds. 

Food inflation is a key factor shaping household confidence and spending decisions, as shown by IGD’s ShopperVista research. 

Why has food inflation remained subdued? 

Falling food inflation  comes as a surprise.  Food inflation has remained lower than expected despite a range of challenges facing the food system, especially energy market disruption and extreme weather. 

Retailers appear to be absorbing some cost increases, while plentiful supply earlier in the year may have provided a temporary cushion. However, the relationship between costs and consumer prices is rarely straightforward, particularly in a highly competitive retail environment 

Strategic pressures would normally be expected to push food prices higher. However, the relationship between costs and consumer prices is rarely straightforward, particularly in a highly competitive retail environment. 

There is no single explanation for why food inflation has remained subdued. A combination of factors may be contributing, including: 

• Businesses absorbing costs to protect shoppers from further price increases 

• Plentiful food supply at the start of the year providing a temporary cushion and higher costs not yet fully feeding through the supply chain.  

• Aggressive hedging by businesses, when compared with previous inflation events (longer contracts, covering more volume) 

• Global energy / food demand constrained, when compared with 2022 when fighting began in Ukraine 

• Mathematical effects – as prices rise, high comparables make stronger percentage increases harder to achieve 

• UK household confidence low, forcing businesses to swallow cost increases in order to stabilise retail prices 

What next? 

While food inflation has eased, many of the underlying pressures affecting the food system remain. These pressures would normally be expected to place upward pressure on food inflation, although the timing and extent of any impact on consumer prices remains uncertain. Businesses should continue to monitor developments that could influence production, availability, costs and consumer demand in the months ahead. Areas to watch include: 

• Farm input prices are rising – Farm input prices are going up, with fertilisers and energy being major concerns. At some point, farmers will need to seek higher prices from buyers, either on the free market or via forward contracts 

• UK farm yields have been very poor – The impact of hot, dry weather is very variable, but UK farm yields for wheat, potatoes and some other items have been disappointing 

• International effects – It is not only the UK that has seen a hot, dry summer. The countries that the UK relies on to supply fruit and vegetables (Europe, North Africa) have also seen tough conditions. Multiple countries will be competing to import goods from a reduced supply base. 

The recent easing in food inflation should not distract from the underlying volatility facing the food system. Building resilience across supply chains, sourcing, production and infrastructure remains one of the most effective ways to manage future shocks and support more stable outcomes for businesses and consumers. These issues are explored in IGD's report, Thriving in a volatile world. 

IGD’s next food inflation forecast will be published on 16 September 2026.