Food inflation has seen a noticeable increase due to suboptimal crop yields.
- In September, food inflation hit 2.3%, up from 2% the previous month.
- Fresh food inflation also rose, but ambient food inflation decreased.
- Overall shop price inflation has reached its lowest point in over three years.
- Experts indicate that strategic retail promotions may be necessary.
In recent months, food inflation has been on the rise, primarily due to inadequate harvests in significant agricultural regions. This uptick is reflected in the latest British Retail Consortium (BRC)-NielsenIQ Shop Price Index, which reported a jump to 2.3% in September, up from 2% in August. Such poor harvests have specifically driven up prices for sugary products and cooking oils.
The increase in fresh food prices is another indicator of the inflation trend. Fresh food inflation accelerated last month from 1% in August to 1.5% in September. On the contrary, ambient food inflation, which includes products like canned goods, noted a slight decrease to 3.3% from 3.4%, marking the lowest rate since March 2022.
Overall shop price deflation also continues, hitting its most significant decline in years. In September, shop price deflation reached 0.6%, down from 0.3% the previous month. Expert Mike Watkins from NielsenIQ highlights this as an indication of shop price inflation stabilizing closer to the long-term range. Such stability suggests a period of adjustment in retail pricing strategies.
The retail sector is witnessing competitive tactics to maintain consumer interest. Helen Dickinson, BRC Chief Executive, noted September’s favorable conditions for bargain hunters, as significant discounts and competition led to deflation in shop prices. Inflation in food remains slightly elevated due to supply chain strains, particularly impacting cooking oils and sugary products, linked directly to poor harvest yields.
Future economic pressures could impact current inflation trends and pricing strategies. Continuous geopolitical tensions, climate change ramifications, and government-imposed regulatory costs are potential disruptors. The BRC emphasizes the need for governmental intervention, particularly through a proposed 20% Retail Rates Corrector, intended to alleviate the retail industry’s disproportionate tax burden and support fair pricing for consumers.
The ongoing food inflation underscores the complexities retailers face amidst external economic challenges.
