2023 food inflation data in-line with IGD forecasts

ONS data is now available for December 2023; food and drink inflation continued to slow that month, ending 2023 in-line with IGD forecasts.

New ONS inflation is now available, covering December 2023 and the year 2023 as a whole.

"All items" CPI inflation rose slightly from +3.9% in November to +4.0% in December. This small step-up reversed the established trend of slowing inflation and ONS notes that a primary reason was an increase in tobacco prices, driven by tax changes.

“All items” remains well above the government’s target rate of +2.0% year-on-year, but the downward trend is encouraging and it should support recovery in real shopper incomes.

Moderating inflation in several markets – Europe, USA and UK – has led some analysts to anticipate interest rate cuts . Both the ECB and the Bank of England have sought to manage these expectations, however.

IGD’s forecast from June 2023 was that food and drink inflation would end the year at +08% to +10% so it was within the forecast range, but at the low end. Food price inflation over the full year was +14.5%, whereas IGD forecast +14% to +16%.

This means that food price inflation has run ahead of wages and most other forms of income throughout 2023, leaving many households under severe pressure.

2024 may offer some relief but, given the relentless pressure of household resources over the last few years, it will be some time before they are able to rebuild their prosperity, even in the “best case” economic scenario.

ONS data on Produce Price Inflation shows that factory input and output prices for food manufacturers remain extremely high . Deep supply chain cuts would be a pre-requisite for price cuts for shoppers.

IGD will issue a new forecast as part of the Viewpoint report series on 25 Jan 2024.