UK: Food inflation climbs to two-year high
Milk prices rose faster than the general fresh-food category
Food inflation has reached a two-year high in the UK, according to data from the British Retail Consortium.
The BRC said today (8 June) that food prices rose by 4.9% in the UK in May, the highest level since June 2009.
The recent dry weather seen in parts of the UK has pushed up prices of fresh food, officials at the BRC said.
"Recent volatility in the cost of key commodities, linked to dry weather and global demand, is now working through to the shop price of some food," BRC director general Stephen Robertson said.
The retail association said the May data marked "almost a year of rapidly rising commodity prices.
However, the BRC claimed that, despite reaching a two-year high, food inflation was "significantly lower than factory-gate inflation". The BRC pointed to the UK's Producer Price Index, which showed output food prices were up 7.3% in April. It said "the fiercely competitive nature of the sector" had meant food inflation was lower than output prices.
Mike Watkin, senior manager of retailer services at analyst firm Nielsen, said: "Food prices have increased slightly this month but this is due to seasonal or weather related fresh foods rather than ambient foods. However, inflation and other rising household bills are still top of mind for shoppers so retailers are offering more promotions and deeper price cuts."
However, he added: "This continues to be an important driver of sales for retailers and a coping strategy for shoppers but should not be seen as the long term answer to any weakening of consumer demand or falls in consumer confidence."
While fresh food prices drove the May inflation data, the ambient food category saw a "sharp deceleration in inflation", the BRC said.
Fresh food prices were up 4.2% in May - compared to a rise of 3.3% in April. However, prices on ambient food climbed 6% in May, down from growth of 6.9% in April.
"The category containing sugars, jam and chocolate reported its lowest inflation rate for over 13 months as pressure from rising cocoa prices eased, falling 29% since a year ago," the BRC noted.
However, the BRC warned that, in broad terms, commodities are set to continue "putting upward pressure" on food inflation "in the near term". It noted the extent of that pressure was "uncertain" but added: "Underlying growth in demand for commodities remains robust due to a growing population and improvements in economic conditions in fast developing emerging markets.
"In the short term, the weather will play a major role in determining supply levels and hence, prices. The lack of rain in the first half of the year through parts of Northern Europe and Southern America is expected to hamper grain crops, putting pressure on already tight supplies."
Sectors: Baby food, Bakery, Canned food, Cereal, Chilled foods, Commodities & ingredients, Condiments, dressings & sauces, Confectionery, Dairy, Dried foods, Fresh produce, Frozen, Meat & poultry, Natural & organic, Private label, Retailers, Seafood, Snacks, World foods
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