Shoppers are being cautioned that there is a possibility of further increases in food prices in the upcoming months, despite a decrease in inflation. Food inflation dropped to 2.2% in May, marking the lowest rate since December 2024, down from the 3% recorded in April.
Karen Betts, the chief executive of the Food and Drink Federation, highlighted that the repercussions of the Middle East conflict are still influencing the market. The closure of the Strait of Hormuz has led to heightened energy and fertiliser expenses, resulting in increased production and distribution costs.
Although there was a decline in food inflation in May, Betts pointed out that consumer prices have not fully reflected the inflationary impact of the Strait of Hormuz closure. It typically takes several months for elevated costs incurred by farmers, processors, and manufacturers to manifest in higher retail prices due to long-term contracts for energy and ingredients.
According to ONS data, prices saw significant increases for beef and veal (9.4%), offal (9.2%), preserved fruit (9.0%), and confectionery products (8.8%). Conversely, prices decreased for various categories, with notable drops observed for flours (-6.1%), olive oil (-4.2%), and jams and marmalades (-3.0%).
Industry leaders had previously warned of potential food price escalations extending into 2028. The Institute of Grocery Distribution (IGD) projects an average food inflation rate of 3.2% to 4.2% next year, and 2.3% to 3.3% in the first half of 2028. Households with children may need to budget an extra £203 for food and drink this year and an additional £207 for the following year.
Despite expectations of a rise, the Consumer Prices Index (CPI) remained stable at 2.8% in May, contrary to economists’ predictions of a 3% increase. The Office for National Statistics (ONS) attributed the unchanged inflation rate to higher transport costs being offset by the easing of food price hikes.
Grant Fitzner, chief economist at the ONS, explained that while transport costs, airfares, vehicle taxes, and petrol prices contributed to upward inflationary pressure, these were counteracted by lower food prices, particularly in meat, dairy, and vegetable items. Additionally, the cost of domestic heating oil decreased following recent increases.
Overall, the inflation scenario depicts a complex interplay of various factors affecting consumer prices, with food prices remaining a significant concern for the foreseeable future.