The rise in the cost of food and drink in the UK is set to reach a peak rate of 17%-19% year-on-year in early 2023, before slowing over the following 12 months, according to a new forecast by grocery insight provider IGD.
At the end of 2023, inflation will likely remain above zero, with the possibility of price reductions beyond that point based on market conditions.
Harvests in 2023 and the value of sterling will be key factors influencing the inflation rate, IGD noted.
These insights are from the latest data released by IGD as part of its quarterly Viewpoint report series and presented at its Insight & Impact 2022 event, held on 8 November 2022 in London.
James Walton, chief economist at IGD, states, “There is no doubt about it that this is a daunting prospect for both households and businesses. Already we can see the food industry pulling together and retailers putting themselves in the shoes of shoppers to understand how best they can support them during this difficult time.
“Whilst it’s clear that there are considerable global and UK-specific economic headwinds ahead, there is some light at the end of the tunnel, with food inflation expected to dissipate slowly during 2023."
Food Price Inflation
In June of this year, IGD's calculations showed that food price inflation would accelerate until autumn 2022, peaking at 14-16%, then dissipate by mid-2023.
However, the food supply chain was affected by major strategic changes, including significant input cost pressures, a tight labour market, continued supply chain disruption and the ongoing war in Ukraine.
As a result, the outlook for food price inflation worsened, leading IGD to issue a revised forecast.
Walton added, “Consumers will be looking to the food industry to keep prices affordable. We know that inflation will eventually come to an end, and we will start to see significant drivers of overall inflation begin to drop off over the coming months.
“Food businesses will need to focus on maximising efficiency to deliver the best possible prices for shoppers and look for opportunities to bring prices back down, as soon as possible.”