Food inflation set to accelerate in 2022 after significant December increase

Shop price annual inflation accelerated to 0.8 per cent in December, up from 0.3 per cent in November, above the 12- and 6-month average price decreases of 0.9 per cent and 0.3 per cent, respectively, latest BRC data has shown.

According to the BRC-NielsenIQ Shop Price Index, this is the second time, following November’s rise, that prices have risen since May 2019.

Food has seen the highest inflation rate since March 2019, accelerating to 2.4 per cent in December, up from 1.1 per cent in November. This is above the 12- and 6-month average price growth rates of 0.3 per cent and 0.6 per cent, respectively.

This was driven mainly by fresh food, with inflation rising significantly in December to 3 per cent, up from 1.2 per cent in November. This is the highest inflation rate since April 2013 and above the 12- and 6-month average price growth rates of -0.2 per cent and 0.5 per cent, respectively.

Ambient good inflation accelerated to 1.7 per cent in December, up from 0.9 per cent in November, the highest rate of increase since March 2021. This is above the 12- and 6-month average price increases of 1 per cent and 0.9 per cent, respectively.

Meanwhile, non-food deflation accelerated to 0.2 per cent in December compared to the decline of 0.1 per cent in November. This is a slower rate of decline than the 12- and 6-month average price declines of 1.7 per cent and 0.9 per cent.

“Food prices were falling earlier on in 2021, but the acute labour shortages across supply chains, amongst other factors, led to the year ending with a notable increase,” Helen Dickinson, chief executive of the British Retail Consortium (BRC), commented.

She warned that prices will continue to rise, and at a faster rate, saying that retailers can “no longer absorb all the cost pressures arising from more expensive transportation, labour shortages, and rising commodity and global food prices.”

Mike Watkins, head of retailer and business insight, NielsenIQ, added: “After a challenging Christmas period, consumers are facing higher energy, travel and for some mortgage costs and the underlying price inflation in retail may only make it more difficult to entice shoppers to spend in January.

“But it is weak consumer confidence and uncertainty around the pandemic rather than shop price inflation which will have the biggest impact on demand at the start of the year”.