UK retailers report record food inflation

Food prices in Britain rose by a record amount over the past 12 months but lower prices are on the horizon, offering some relief to squeezed consumers, the British Retail Consortium (BRC) said on Tuesday.

The BRC, representing 5,000 retailers including supermarkets, said food prices at its members soared 15.7% in the year to April, the biggest increase in records going back to 2005, after a 15% rise in the year to March.

Coffee beans and the packaging and production of ready-meals pushed up food inflation, but prices for butter and vegetable oil fell.

“We should start to see food prices come down in the coming months as the cut to wholesale prices and other cost pressures filter through,” BRC Chief Executive Helen Dickinson said.

Overall inflation among BRC members dropped to 8.8% from March’s 8.9% helped by heavy discounting of clothing, footwear and furniture.

Britain’s consumer price inflation hit 11.1% last October, its highest in over 40 years. It then fell more slowly than the Bank of England expected and remained above 10% in March.

The official measure of food price inflation – which is calculated differently to the BRC’s – was the highest since 1977 in March at 19.1%.

Almost half of Britons have said they are buying less food than normal, and food prices tied with energy bills as Britons’ top concern, according to the Office for National Statistics.

Market research company Kantar estimated last week that grocery inflation edged down to 17.3% in the four weeks to April 16 but said it was too soon to be sure it had peaked.

The BRC data was based on prices collected from April 1-7.

MARGINS DOWN

Food retailers have said they expect prices to rise in 2023 overall but with the rate of inflation declining through the year and some products which have seen the sharpest rises falling in price.

Market leader Tesco said last month it expected the prices of bakery products and vegetable oils to come down as deflation in grain and oil markets feeds through.

Retailers deny claims that they are profiteering, saying they have taken a profit hit and have margins of 4% or less.

ONS data for March showed manufacturers paid 29.1% more for imported food than a year earlier, down from a record 31.4% jump in the year to October. The cost of domestically produced ingredients rose by 15.1%.

France’s government has pledged to take action against food retailers who fail to pass on lower wholesale prices to consumers. Britain’s opposition Liberal Democrat party called on Tuesday for the government to investigate supermarket profits.

In other figures released on Tuesday, businesses were cautiously optimistic about the outlook for the rest of 2023.

S&P Global said its survey of manufacturers’ expectations for future output hit the highest since February last year.

The Confederation of British Industry said business volumes in the services sector edged down in the three months to April, but firms expected a return to growth in the next three months, the first such rise for consumer services firms in over a year.

The Institute of Directors (IoD) reported a fifth consecutive monthly rise in its members’ confidence, returning to its level just before Russia invaded Ukraine.

“It is particularly reassuring to see a recovery in investment intentions,” IoD chief economist Kitty Ussher said.