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Food inflation has reached its highest level on record, with the sector predicting no stall in price increases throughout the year.
Figures published in the British Retail Consortium’s (BRC) shop price index show food inflation rose to 13.8 percent in January, up from 13.3 percent in December. This rise has pushed it above the three-month average rate of 13.2 percent.
The BRC also reported a rise in costs of ambient food, such as canned vegetables and soups, which rose to 11.3 percent in January, up from 11.0 percent in December.
“Retail prices rose in January as discounting slowed and retailers continued to face high input costs. Ambient food inflation accelerated the most as wholesale and bulk prices grew, particularly for sugar and alcohol,” said Helen Dickinson OBE, chief executive of the British Retail Consortium.
Additionally, fresh food inflation also increased in January to 15.7 percent, up from 15.0 percent in December.
Dickinson added: “Fresh food prices also remained high due to increased food production costs as well as elevated wholesale fruit and vegetable prices. Meanwhile, clothing and footwear prices eased, so customers were able to replenish their wardrobes with some bargains during the January sales.”
Charles Allen, retail analyst at Bloomberg Intelligence, told City A.M. that food inflation is “quite close to its peak” though it may be more persistent through the year as some “hedged costs within the supply chain unwind and have to be passed through”.
Speaking to City A.M., George Phillips, commercial director at Wanis International Foods, a manufacturer and distributor of food brands, said that whilst the rate of inflation witnessed in 2022 looks to be slowing down, the sector doesn’t “anticipate prices to come down anytime soon”.
Phillips explained: “This is driven by various factors including the price of packaging and components still increasing, mainly driven by increased energy costs in production and raw materials. So, glass and cardboard prices are still very high, and supply is still an issue.”
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Still, I am confident that Britain’s economic outlook will improve with the measures taken by the government and the Bank of England to control inflation.
The deeper reason behind the United Kingdom’s economic problems is, in my opinion, Brexit. Despite denials by successive conservative governments, economic troubles have started the minute the UK voted to leave the EU. The UK has yet to manage to sign a trade agreement with the United States despite all the talk about the ‘special relations’ between the two allies.
There are growing calls for the UK to re-join the EU but the real question is whether the EU wants the UK back in the Union.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert