The latest inflation data from the ONS reveals that “all items” inflation slowed marginally in August. Food and drink inflation continued to accelerate, however.
ONS has released its latest inflation data covering August 2022. This shows that year-on-year inflation has declined slightly, recording 9.9% on the CPI index (compared to 10.1% last month) and 8.6% on the CPIH index (versus 8.8% in July). The 0.2% decline in the CPI measure is principally due to falling motor fuel prices.
As shown in Figure 1, price change in “food and drink” strengthened again in August, up 0.4 percentage points to 13.1% year on year. This is the highest rate since 2008, although the rate of increase has slowed.
Food price inflation of 13.1% is around 2 percentage points behind IGD’s forecasts for food price inflation at this point of the year, primarily because produce prices have risen less than expected.
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Inflation is being largely driven by supply-side factors, especially energy prices. This continues to erode food production margins, as illustrated in the chart below.
Input prices for food producers declined slightly in August, down by 0.8%. This is the first decline since July 2021 and was due mainly to lower fuel costs.
The gap between input and output prices remains wide, and IGD expects these margin pressures to continue to feed into retail prices in the coming months.
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