Economics bulletin 17 June

Date : 16 June 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.

Food inflation to rise sharply

Food inflation is likely to reach 15% this summer, rising on average around 11% over 2022, according to IGD’s latest Viewpoint Special: Exploring the outlook for food inflation.

Our forecasts indicate that food inflation is set to hit its highest level for more than 20 years and the pressure on consumers will last through to mid-2023. These predictions deliver yet another blow to the most vulnerable households in the UK, who will be hit the hardest by the spike in food and drink prices.

IGD has calculated that the average monthly spend on groceries for a typical family of four will reach £439 from January 2023 – a significant increase from £396 in January 2022.

Real wages continue to decline

The average weekly wage increased by 6.8% over the year to April 2022. However, adjusting for the impact of RPI inflation, workers are 2.2% worse off than a year ago.

Taking out the effect of bonuses, which tend to benefit higher earners, inflation is outstripping wage growth by 5.2%. This is a significant contraction of household incomes. See here for more details.

Falling economic activity

UK economic activity declined by 0.3% in April. Output in March was down 0.1%, raising concerns that a contraction may be gathering pace. See here for more details.

This comes as the Bank of England has agreed to raise interest rates to 1.25% in order to help curb inflation. This is likely to further constrain growth over the coming months.

Government unveils food strategy

The Government has unveiled its food strategy, responding to recommendations set out in the National Food Strategy independent review last year. The strategy includes policies to boost health, sustainability, accessibility of diets and to secure food supply.

The strategy targets three key objectives to support England’s agri-food sector:

  • To generate a prosperous and resilient agri-food sector that contributes to the levelling up agenda
  • To develop a sustainable and affordable food system that provides healthier diets for consumers
  • To drive the growth of UK agri-food import and exports

For more information, please see here.

Northern Ireland protocol

The UK Government has published plans to amend parts of the Northern Ireland Protocol in order to ease the impact on businesses moving goods between Great Britain and Northern Ireland.

Under the new plans, goods arriving from Great Britain into Northern Ireland, with the intention of remaining in Northern Ireland, would not require checks and only minimal paperwork. Any goods travelling onto the Republic of Ireland would require checks.

The European Union has responded to the government plans by announcing it is taking legal action.

Any legislation is expected to take at least a year to be passed into law. The government is looking to reach a negotiated settlement with the EU.

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