The rise in the cost of essential food items is likely to reach a peak of up to 15% this summer and will last much longer than initially predicted, according to IGD’s latest Viewpoint Special Report – “Exploring the outlook for food inflation” – released today.
IGD warned that the UK economy is facing its strongest period of inflationary pressure since the 1970s. It also expects food inflation to persist for longer than official forecasters due to several factors, including the impact of the war in Ukraine, pre-existing supply chain challenges and the limited effectiveness of monetary and fiscal policy.
These predictions deliver yet another blow to the most vulnerable households in the UK, who will be hit the hardest by the spike in food and drink prices. IGD has calculated that the average monthly spend on groceries for a typical family of four will reach £439 from January 2023 – a significant increase from £396 in January 2022.
The strongest inflation pressure is expected to come from meat, cereal products, dairy, fruit and vegetables. In particular, products that rely on wheat for feed, such as white meats, are likely to see prices soar in the short term.
IGD predicts that the acceleration in food inflation is likely to last until mid-2023. Additionally, the UK food and consumer goods industry is uniquely exposed to current pressures due to a reliance on food imports and the impacts still being felt from the EU exit.
James Walton, Chief Economist, IGD, said: “From our research, we’re unlikely to see the cost-of-living pressures easing anytime soon. This will undoubtedly leave many households – and the businesses serving them – looking to the future with considerable anxiety. If average food bills go up 10.9% in a year, a family of four would need to find approximately £516 extra per year. We are already seeing households skipping meals – a clear indictor of food stress.
“We expect the mood of shoppers to remain bleak for the foreseeable future as they are impacted by rising inflation and a decline in real wages. Shoppers are likely to dial up money-saving tactics as far as possible.”
The report also highlights the predicted rate of inflation is likely to push the economy into recession or, at least, into “stagflation”.
