Market Update: We break down the business implications, market impact, and expert insights related to Market Update: UK inflation: What is the rate and why are prices still rising? – Full Analysis.
Although inflation has fallen significantly since the October 2022 high, prices have not fallen. They have just been rising less quickly.
Inflation soared in 2022 because oil and gas were in greater demand after the Covid pandemic, and energy prices surged again when Russia invaded Ukraine.
It then remained well above the 2% target, partly because of higher food prices.
The figures show food price inflation fell from 3% in the year to April to 2.2% in the year to May.
The rate of inflation for bread, meat, pasta and vegetables all dropped compared to last year.
The Agriculture and Horticulture Development Board said that British households are struggling to afford beef at the moment, meaning demand for the product has fallen.
At the same time, while the number of cows being slaughtered has fallen, carcasses weigh more so there’s been oversupply.
The ONS says that the price of beef and veal (it lumps them both together) rose by 9.3% in May which, admittedly is still high.
But compared to previous months when prices jumped by as much as 27%, the slowdown is evident.
However, it can take seven to 13 months for cost increases in the food supply chain to feed through to prices on supermarket shelves.
The Food and Drink Federation, which represents manufacturers, said that current food prices don’t reflect the impact of the Strait of Hormuz closing.
It warned that food inflation was likely to rise this year and into 2027.
Employees who face higher living costs are more likely to push for pay rises.
Firms who are already facing higher staff costs as a result of increased employer National Insurance contributions and minimum wage hikes are then under pressure to put up their own prices. This can in turn contribute to higher inflation.