Economics bulletin 14 April

Date : 14 April 2022

Your overview of economic and policy news with a focus on the food and consumer goods industry, featuring the latest developments and guidance on the Ukraine crisis, the rising cost of living, labour shortages, COVID-19 and adapting to a new relationship with the EU.

Inflation reaches a new high

UK inflation has reached its highest level in 30 years, recording 7% on the CPI measure and 9% on the old RPI measure. Price rises in food and drink have accelerated dramatically, from -0.6% in August 2021 to 5.9% in March 2022.

Input prices for food producers have increased by 7.7% since August 2021. It is expected these rises will continue to feed into retail prices. The OBR forecast that inflationary pressure will peak later in the year at 8.7%, averaging 7.4% over the year.

See our Viewpoint short video on rising inflation.

Cost of living squeeze

The latest UK labour market data reveals a continued decline in unemployment, whilst the number of vacancies remains elevated.

Although the average weekly wage is still rising, adjusting for the impact of RPI inflation, workers are actually 2.6% worse off than a year ago. Taking out the effect of bonuses, inflation is outstripping wage growth by 3.8%. This raises significant welfare concerns for vulnerable households.

Hear more about how the conflict in Ukraine is exacerbating the cost of living crisis in our Viewpoint webinar on 27 April.

Economic growth slows

UK economic output slowed to +0.1% in February, down from +0.8% in January. The UK economy is now 1.5% larger than its pre-pandemic level. This monthly estimate will be concerning for policy makers as growth of 0.3% was forecast. Given the collapse in shopper confidence due to the war in Ukraine and the rising cost of living, an economic contraction over the coming months is becoming a possibility.

Availability concerns

IGD continues to monitor any impact on product availability, resulting from supply chain challenges including labour shortages and changes to border controls.

In the latest IGD shopper research (conducted 11-12 April 2022), more than half of adults reported there is availability issues recently (57% compared to 56% a month ago). Availability issues remain highest for fresh produce and savoury snacks. More adults have recently felt the need to stock up or purchase more than they normally do (37% vs 33% a month ago). There has also been an increase in the numbers saying they will or might stock up (41% vs 35%).

Further supply disruption

There are concerns over further supply disruption for freight crossing the channel over the Easter weekend. Currently, freight traffic is reported to be free flowing to the border.

In recent weeks a combination of holiday traffic, an outage of the Goods Vehicle Movement System, used by HMRC and the continued suspension of P&O sailings have caused severe delays on routes into Folkestone and Dover.

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