Increases in the cost of living are set to continue, with the price of essential food items to experience 15% inflation over the summer.
IGD’s latest Viewpoint Special Report – “Exploring the outlook for food inflation” warned that the UK economy is facing its strongest period of inflationary pressure since the 1970s and thats food inflation is to persist for longer than official forecasts.
It puts this prolonged period of inflation down 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.
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 has calculated that the average monthly spend on groceries for a typical family of four will reach £439 from January 2023, up from £396 in January 2022.
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.
The report also highlights the predicted rate of inflation is likely to push the economy into recession or, at least, into “stagflation”.
James Walton, chief economist at 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.”