Food inflation continues to decline

Date : 19 October 2023

Overall inflation has remained flat, maintaining pressure on households. Positively, food inflation continues to decline in line with IGD’s forecasts, with prices falling for the first time since September 2021.

The latest inflation data from the ONS, shows that “all items” inflation has remained level, at 6.7% in September, when measured by the CPI method. Using the CPIH method, inflation remained flat at 6.3% in September.

Inflation remains over three times greater than the Bank of England’s target CPI rate of +2.0% (plus or minus 1%). This maintains the economic pressure on households.

The steep declines in inflation seen earlier in the year have slowed over the summer months, with overall inflation only 0.1 percentage point below July.

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. Fuel prices have increased by 9.5% since mid-July due to rising oil prices.

Food and drink inflation continued to decline with prices in September rising by 12.2% year-on-year, compared with 13.6% in August.

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.

The largest downward contributions came from milk, cheese, eggs, mineral water, soft drinks and juices.

Inflation for food and drink remains in-line with IGD forecasts – still well above “all items” inflation and above income growth for most households, making food more expensive in real terms.

IGD Viewpoint

With overall inflation trending downwards in recent months, there appears to be less pressure for the Bank of England to make any significant changes to interest rates.

However, 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.

To understand the outlook for inflation, the wider economy, consumer sentiment and government policy, join our webinar on 16 November. You can register your place here.

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