Despite the marginal slip in inflation, food industry insiders claim that grocery prices will remain elevated this year.
Overall UK price inflation fell for the third month in a row to 10.1 per cent in the year to January from 10.5 per cent in December. Grocery prices are one of the main drivers fueling overall inflation, and were up 16.7 per cent on the year to January.
Matt Hood, managing director of Co-op Food, which has more than 2,500 UK stores, said prices continued to rise in January as costs for grocers did, making it “incredibly tough”.
“I think there is increasingly positive news stories being put out there about energy prices starting to calm down and about fuel prices starting to come down. For me, the inflation will probably still be with us on food unfortunately until the back end of the year.”
He added that the retailer would look to pass on falling costs “as quickly as possible”.
“Inflation is the thing that keeps us up at night,” he told the BBC’s Today programme. “Believe it or not we as retailers are trying our hardest not to flow it all through to our customers.”
He added that the retailer would look to pass on falling costs “as quickly as possible”.
Waitrose chief executive James Bailey too expressed a similar opinion when he told Times Radio that it’s a very, very difficult market out there for consumers.
“The budgets are being squeezed very tightly… food inflation is part of that challenge.”
Analysts warned that surging food prices will hit poorer families harder, as they tend to spend a higher proportion of their income on essentials such as energy and groceries. Olive oil, sugar and low-fat milk prices have all increased by more than 40 per cent in that time.
The Resolution Foundation think-tank estimated the poorest tenth of households are facing an effective inflation rate of 11.7 per cent, compared with only 8.8 per cent for the richest.
“With energy and food prices remaining stubbornly high, poorer households continue to face far higher living costs than richer families,” said research director James Smith.
Reacting to the Office for National Statistics figures, which came out on Wednesday (15), Chancellor Jeremy Hunt said while the drop in inflation was “welcome”, the battle against rising prices was “far from over”.
“High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan to halve inflation this year, reduce debt and grow the economy,” Hunt said.
