Economics bulletin 20 October

Date : 19 October 2023

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 rising cost of living, conflicts in the Ukraine and the Middle East, labour shortages, policy developments and adapting to a new relationship with the EU.

Food inflation falls

Year-on-year CPI inflation for food and drink declined by 1.4 percentage points to 12.2% in September. The largest downward contributions came from milk, cheese, eggs, mineral water, soft drinks and juices.

September was the first time that food and drink prices declined, month-on-month, since September 2021, with prices falling marginally by 0.1% between August and September.

IGD Viewpoint: A significant fall in food prices is welcome, but food inflation remains at historically high levels. Food inflation is continuing to decline in line with IGD forecasts and by December 2023 is predicted to be between 8% and 10%.

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Inflation remains flat

Overall CPI inflation remained flat in September at 6.7%. Motor fuel prices were the largest upward contributor to the inflation rate over September and have been the primary contributor to holding the overall inflation rate static.

IGD Viewpoint: Looking ahead, the recent surge in oil prices will be of most concern to policymakers. Events in the Middle East have had an impact on oil prices, driving Brent crude oil prices back above $90 a barrel. This will maintain pressure on fuel prices over the next few months, thus keeping inflation higher than previously expected.

For a full analysis see our article here.

Economy warning

The Institute for Fiscal Studies (IFS) has warned that there is “no room” for tax cuts or spending increases in the forthcoming Autumn Statement. In its Green Budget report, the IFS stated that the country is “in a horrible fiscal bind”.

IGD Viewpoint: The economy is clearly still very fragile and vulnerable. There is a challenge to service government debt. We will be reviewing the Autumn Statement on 22 November and the impact on the food and consumer goods industry.

Real wages rise

The average weekly wage (including bonuses) in the UK rose by 8% in August as strong pay growth was maintained. The speed of change however may be slowing, with the annual growth rate down 0.5 percentage points compared to July, indicating a slightly cooling labour market.

IGD Viewpoint: As workers’ pay growth continues to be strong as inflation fades, it provides an opportunity for households to recover some of the lost ground over recent years. However, with overall inflation declining slowly and workers’ wage growth likely to have peaked in July, we may be set for a period of low ‘real wage growth’ for the foreseeable future.

For a full analysis, see our article here.

Collaborate on sustainability

The Competition and Markets Authority has published the Green Agreements Guidance to explain how competition law applies to sustainability agreements between firms operating at the same level of the supply chain to help industry to act on sustainability.

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