UK inflation down to 8.7% but food prices still rising

The UK’s rate of inflation from the year to April was recorded by the Office for National Statistics (ONS) as 8.7%. This is a decrease from 10.1% in March, but inflation has remained higher than the 8.2% estimates from experts. Despite the decrease in the rate of inflation, food prices have increased at a rate not seen for around 45 years, which may be why inflation hasn’t decreased to the levels expected.

UK food prices close to record highs

Food prices in the UK have increased at a speed not seen for almost 45 years, including many household staple foods like sugar, potatoes and milk. The rate of food inflation has showed signs of slowing in April, but at 19.1% the food inflation rate is still close to record highs.

There are multiple reasons why the cost of foods remains high. One reason is that Ukraine is a significant producer of sunflower and grains, which are used to make bread, oil and much more. The illegal invasion of Ukraine has caused the production and shipments of these food sources to be difficult and sometimes impossible. Another reason is the weather. There have been instances of extreme weather in places where they grow beets. These beets are required to produce sugar and some vegetables.

The BBC has reported the foods that have been subject to the greatest levels of inflation over the course of a year to April 2023. These are granulated sugars (47%), cheddar cheese (39%), eggs (37%), milk (33%), potatoes (28%), bread (28%) and chicken (23%).

Is food to blame for sustained high inflation?

The ONS calculates the rate of inflation based on the price changes in a “basket of goods”, which includes common household items. Foods are included within the basket of goods, and therefore the almost-record-levels of food inflation do have an impact on the overall rate of inflation.

However, there could be another reason why food inflation is staying high, especially when you learn that the supermarkets are paying much less for the products on their shelves right now compared to what they were paying months ago.

Grant Fitzner, the chief economist at the ONS, stated that supermarkets are paying below 10% for food sources this month compared to around 15% over the last year, whilst adding that imported foods are now considerably cheaper than in the recent past.

These lower prices have yet to be experienced by consumers because supermarkets have longer-term contracts with food producers, so even though the supermarket is now paying less, you won’t be paying less just yet.

What does all this mean for your mortgage? If you’re concerned about high interest rates, speak to one of our professional and friendly mortgage advisers for personalised support.  

June 2023