Fresh food inflation at highest level since 2008: BRC

The rapidly rising price of food including milk and fresh produce pushed August shop price inflation to the highest levels since 2008 as the war in Ukraine raised costs for farmers.

Prices in shops rose by 5.1 percent, a big increase from 4.4 percent in July, as food producers passed on increases in the cost of fertiliser, wheat and vegetable oils, large amounts of which are produced in Ukraine and Russia, according to data from the British Retail Consortium (BRC) and market research firm NielsenIQ.

Fresh food prices rose by 10.5 percent, the highest rate since September 2008. The increase from a rate of 8 percent in July more than offset a slight decline in non-food inflation of 3 percent in August from 2.9 percent a month before.

Ambient Food inflation accelerated to 7.8 percent in August, up from 5.7 percent in July. This is above the 3-month average rate of 6.0 percent. This is the fastest rate of increase since March 2009.

Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said: “Mounting cost pressures up and down supply chains meant shop price inflation hit a new high in August. The war in Ukraine, and consequent rise in the price of animal feed, fertiliser, wheat and vegetable oils continued to push up food prices. Fresh food inflation in particular, surged to its highest level since 2008, and products such as milk, margarine and crisps saw the biggest rises.”

“The rise in shop prices is playing into wider UK inflation, which some analysts are predicting could top 18 percent in 2023. The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials, and raising staff pay," Dickinson says, calling on the new prime minister to relieve some of the cost burden bearing down on retailers, like the upcoming increase in business rates.

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ, said that inflation continues to accelerate and shoppers are already cautious about how much they spend on groceries, with a fall in volume sales at supermarkets in recent months.

"We can expect this level of food inflation to be with us for at least another 6 months but hopefully some of the input cost pressures in the supply chain will eventually start to ease. However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year," Watkins says.