Food inflation rises as ‘storm clouds gather’
Food inflation has started to climb as industry figures warn “storm clouds are gathering” over potential double-digit food inflation later this year.
The rate of food inflation climbed to 3.7 per cent in the year to March, up from 3.3 per cent year on year to February, according to the Office of National Statistics.
This remains above the headline rate of inflation, which today rose to 3.3 per cent, as retailers brace for soaring energy and supply chain costs caused by the Iran war.
Food and non-alcoholic drink inflation grew by 0.3 per cent month on month to March, with prices rising the fastest for beef and veal (18.8 per cent), whole milk (12.7 per cent) and confectionery (11.1 per cent).
Coffee and tobacco are also among the drivers of high food inflation, and industry figures are calling on the government to offer energy tax breaks to the most energy-intensive types of food production, like coffee, sugar and bread.
Olive oil prices dip
But prices fell for nine categories in the year to February, including flour (down 6.8 per cent), olive oil (6.2 per cent) and pizza (2.6 per cent).
Last week, the boss of olive oil giant Filippo Berio accused British supermarkets of “taking the mickey” over the pricing of his products.
Olive oil tycoon Walter Zanre claimed grocers have failed to pass on price reductions to shoppers in recent months.
On Tuesday, industry body the Food and Drink Federation (FDF) called on the government to intervene to halt food inflation before it’s “too late”.
The body, which represents the UK’s 12,000 food and drink manufacturers, said food inflation could soar to nine or 10 per cent this year.
After Russia invaded Ukraine in February 2022, food inflation trailed headline inflation for a number of months before it spiked in June, eventually soaring to more than double the overall rate.
The FDF suggests a similar lag could apply to the energy crisis caused by the Iran conflict, with the comparative spike in food inflation yet to rear its head.
Food inflation on the horizon
Reacting to Wednesday’s ONS food inflation statistics, FDF chief economist Liliana Danila said “the clouds are gathering”.
She said: “The war in Iran has delivered a cost shock that is already too large for manufacturers to absorb in full.
“The impact on prices will take time to work its way through the system, but it’s only a matter of time before it does.”
Harvir Dhillon, economist at trade body the British Retail Consortium, called on the government to help retailers avoid having to hike prices for shoppers.
He said: “As a more energy intensive sector, supermarkets and their supply chains are likely to be disproportionately affected.
“With food prices set to rise, it is lower income households that will be hit hardest. [The] government must target support towards these retailers, in particular looking at non-commodity charges which push up the cost of businesses’ energy bills.”
Last week, Tesco’s chief executive said he “does not recognise” the food inflation warning dealt by the FDF.
Sainsbury’s will provide a crucial update on whether food inflation is on the horizon tomorrow, when the grocery giant delivers its full-year results.