U.K. inflation rate fell sharply to hit below 10% for the first time since August 2022 despite rising F&B prices
Food and non-alcoholic beverage prices in the United Kingdom (U.K.) including staples like sugar, milk and pasta reported an annual rise of 19.1% in April 2023 as compared to 19.2% in March 2023.
As per the data shared by the Office of National Statistics (ONS), U.K., the annual rate for food and non-alcoholic beverage is the second highest rate in the past 45 years, when the rate in August 1977 was estimated to be 21.9%.
It comes as the overall U.K. inflation rate fell sharply to hit single figures for the first time since last August 2022. Inflation was 8.7% in the year to April 2023, down from 10.1% in March 2023. The rate has shot up over the last 18 months, as food and energy prices have soared, leaving many households feeling squeezed.
Taking it to twitter, ONS tweeted
Annual inflation has continued to ease in April 2023
— Office for National Statistics (ONS) (@ONS) May 24, 2023
▪️ Consumer Prices Index, including owner occupiers’ housing costs (CPIH) rose by 7.8% in the 12 months to Apr 2023, down from 8.9% in Mar 2023
▪️ CPI rose by 8.7%, down from 10.1%
➡️ https://t.co/0TK0uIn6Vo pic.twitter.com/RkBH7FY6QX
Speaking on the occasion, the Chancellor of the Exchequer – Jeremy Hunt said, “There are things underneath those numbers which show that this battle is far from over. We’ve got a long way to go.”
Inflation has dropped due to the fact that energy price rises are slowing from the extreme hikes seen a year ago just after Russia, a major oil and gas producer, invaded Ukraine and was hit with sanctions. Ukraine is also a big producer of grains and sunflowers, which are used in everything from bread to oil and animal feed. Wholesale food prices have risen because the war has disrupted Ukraine’s shipments.
Extreme weather has also hit crops, including the beets used to make sugar as well as some vegetables. On the other hand, the cost of staples like bread, cereal, fish, milk and eggs is rising slightly less quickly.
The Chief Economist of ONS – Grant Fitzner said, “If you look at what prices businesses are facing and how much they’re paying for domestic food materials that has come down from over 15% annually last month to under 10% this month.”
Retailers claim that falling wholesale prices take time to filter through to supermarket shelves due to the long-term contracts they typically sign with food producers. Inflation is higher in the U.K. than in other advanced countries such as Germany which has an inflation of 7.6%, France with an inflation of 6.9% and the United States (U.S.) with an inflation of 4.9%. It is still 4 times higher than the Bank of England’s 2% target. It has raised interest rates 12 times since December 2021 to tackle inflation.
Since March 2023, the Bank of England has slowed the pace of rate rises. However, with the latest figures being out, there are speculations that rates could climb by a further percentage point to 5.5% by the end of the year.
