Economics: Five months of negative food price inflation

Date : 27 April 2021

Year-on-year “all items” inflation in the UK stood at +1.0% in March 2021 when measured by the CPIH method, driven mainly by rising clothing / footwear and transport costs.

There is still no sign of the fairly rapid uptick in inflation predicted by the Bank of England earlier this year, but this may yet come as special tax concessions end and businesses pass on the higher cost of operating under “Covid secure” conditions.

Inflation for food and beverages remained negative in March at -1.4%. This is the fifth successive month of food price deflation. This may reflect intense price competition between major retailers (eg: major supermarkets “price matching” with discounters).

Inflation is building in the supply chain, however, with UK farm output prices edging up. Prices for animal fodder in particular are affected by poor harvests in 2000 and changes on global commodity markets.

Dry weather in Spring 2021 may also impact food supplies and some farmers now report rising prices for fertilizers (possibly connected with rising energy prices).

Clearly, these price increases must be passed on at some point, but many Uk shoppers are not well-positioned to tolerate them.

UK inflation trends chart

UK inflation trends chart
Click charts to enlarge

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