Food inflation reaches 45-year high

UK inflation in March eased slightly, down from 10.4% to 10.1% using the CPI method. Food inflation continued to climb reaching 19.1%, a 45 year high.

The latest inflation release from ONS shows that overall inflation in the UK has weakened slightly, following last month’s surprising rise.

Using the CPI method, year-on-year “all items” inflation was +10.1% in March 2023, down 0.3 percentage points compared to February.

Inflation has remained stubbornly high over Q1 2023, only 1 percentage point below the peak in October 2022 of +11.1%

Downward contributors to the monthly change came in the form of motor fuels and housing services (especially domestic fuels such as heating oil), reflecting change in global oil prices.

Inflation remains above double digits in part due to a significant impact from food price inflation. Year-on-year inflation for food and drink rose significantly in March to +19.1%, up from +18.0% in February.

Food inflation is now very slightly above the peak predicted in IGD’s latest food inflation predictions, issued in November.

Concerningly for policymakers, “core” CPIH (excluding energy, food, alcohol and tobacco, which are more subject to volatility) remained flat in March at +5.7%.

This could indicate that a level inflation for goods and services in the economy remains. This may be driven by pay growth, or perhaps by “second-round” effects as inflation passes through complex supply systems.