Economics bulletin 22 September

Date : 21 September 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, the Ukraine conflict, labour shortages, policy developments and adapting to a new relationship with the EU.

Food inflation declines

Year-on-year CPI inflation for food and drink declined by 1.2 percentage points to 13.6% in August. Dairy, vegetables and fish products made the largest contribution to this slowdown.

Significant food inflation has exposed fragility in the UK food and grocery supply chain. Read our latest Viewpoint Special report: Rebuilding economic resilience in the UK food supply chain or download our one-page Executive Summary to understand the key issues impacting the food supply chain and the emerging threats.

IGD Viewpoint: Food price inflation is still extremely high, but is trending down, more or less in line with our forecasts. Food inflation has now peaked and will decline slowly over 2023. By December 2023 food inflation is predicted to be between 8% and 10%.

Overall inflation falls

Against expectations, overall CPI inflation declined slightly, by 0.1 percentage points, to 6.7% in August 2023. “Core” inflation, which excludes the most volatile items such as energy, food, alcohol and tobacco, declined by 0.7 percentage points to 6.2%.

IGD Viewpoint: Another fall in inflation is welcome, but inflation is still three times greater than the Bank of England’s target CPI rate of +2.0% (plus or minus 1%) and the latest decrease is only small, contrasting with the steeper decreases seen earlier in the year.

For a full analysis see our article here.

Interest rate decision

The Bank of England Monetary Policy Committee has voted to maintain interest rates at 5.25%. This is the first time since November 2021 that the Bank of England has not increased interest rates.

The decision not to change interest rates follows a slight decline in inflation (see above). However, the OECD has predicted that the UK would have the highest inflation rate in the G7, averaging 7.2% in 2023. Inflation is expected to fall significantly in 2024 to 2.9%.

Simpler Recycling

As part of a wider announcement on the UK’s net-zero targets, DEFRA plan to introduce ‘Simpler Recycling’ reforms, replacing the previous ‘Consistency in Recycling’ reforms.

The new plan intends to ensure that all homes in England will recycle the same materials, creating a stream of materials for manufacturers to recycle. Further details of the Simpler Recycling scheme are expected.

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