Rising UK food prices worry households and politicians alike
In the week that UK food price inflation hit its highest level in over 45 years, detailed official statistics show that if British consumers want to watch the pounds in their pockets, they need to eat sweet potatoes.
Data from the Office for National Statistics shows that orange tuber prices were up just 2 percent in the year to March, exactly in line with the Bank of England. inflation aim. General food prices, by contrast, rose 19.2 percent.
However, the reasonable cost of sweet potatoes, the only item the ONS measures in its “other root crops and root crop products” category, will do little to help households with the cost of living. Families in the UK, on average, dish out just £0.30 to them for every £1,000 they spend. The meal overall is £107.
Sky-high prices in almost every food category are changing household behavior and worrying policymakers.
Food categories dominate the list of items in the ONS consumer inflation measure where prices are rising rapidly.
Olive oil prices rose 49 percent in the year to March; sugar rose 32 percent; and milk, cheese, and other dairy products had inflation rates above 30 percent.
The BoE knows that it has no hope of reaching its inflation target until food price inflation subsides significantly.
For their part, households have reacted to the increase in food prices by shopping at cheaper supermarkets, buying less and looking for cheaper items.
In the latest retail sales figures, the volume of goods purchased from non-specialist grocery stores, which includes supermarkets, fell 4.4% in the year to March. This drop came even as spending at these stores rose 8.9 percent.
Spending more and getting less has been the reality for most UK households.
Esme Harwood, the director of Barclaycard, said research by the payments company in March found that almost all shoppers were concerned about inflation in food prices and that more than six in 10 were looking for ways to economize, as whether it’s cutting back on luxuries, finding special deals, or looking to avoid waste.
“The below-inflation rise in grocery spending shows Brits are still doing everything they can to save money on their weekly groceries,” he said.
Fraser McKevitt, Kantar’s head of consumer and retail information, said the main way households were reacting was by “buying cheaper products”. Data compiled by the market research group showed that spending on lower-cost own-brand products rose 16.5 percent in the year to March, while spending on name-brand products rose just 7 percent.
The concern among policymakers about food inflation is that shoppers know the prices of everyday items and notice when they go up. This threatens to exaggerate perceptions of general price increases and make people more militant in seeking wage increases, leading to higher inflation.
UK politicians are not alone in this concern because food inflation has been high in many advanced economies. The food inflation rate for the EU as a whole was identical to the UK in March at 19.2 percent and was higher for Portugal, Sweden and Germany, among others. The rate in Hungary reached 44.8 percent in March.
Retailers insist that food inflation represents the lagged effect of increases in energy and commodity prices over the past year coupled with poor harvests and a period of sterling weakness, suggesting that the household crisis could end soon.
Helen Dickinson, chief executive of the British Retail Consortium, a trade body, said food price inflation was likely to “slow down in the coming months as we enter the UK growing season.”
High food prices do not reflect the greed of big supermarkets, Dickinson insisted. “Retailers remain committed to helping their customers and keeping prices as low as possible,” she said.