Rising food prices will soon overtake the price of energy as the driving force behind inflation over the summer, a leading thinktank has said.
According to the Resolution Foundation, grocery bills that had rocketed by almost 20 per cent during the past year would continue to increase, replacing energy prices that were expected to begin falling over the next few months.
The thinktank said it was not clear that politicians were prepared for another year of food price rises or that “policy debates have caught up with the scale of what is going on”.
The Resolution Foundation’s report, Food for Thought, says food prices are expected to contribute “more to overall inflation than energy” in the months ahead.
“Between March and September 2023, food prices are expected to contribute around 2 percentage points to inflation each month, while the contribution of energy prices is set to fall from 3 percentage points to less than 1,” the report estimates.
Lalitha Try, one of the report’s authors, said that everyone realises food prices are rising “but it’s less clear that the scale of the increases has been understood in Westminster”.
“What rising food prices have in common with surging energy bills is that they pose a greater challenge to lower-income households, who spend a higher proportion of their income on food – 15 per cent, compared with 10% for the highest-income households in 2019-20.
“As a result, the effective inflation rate for the poorest 10th of households was almost 50 per cent higher compared with the richest 10th of households in March,” Try added.
The Bank’s governor, Andrew Bailey, told business leaders last week that he was concerned that food and other non-energy prices would remain elevated, eating into the disposable incomes of millions of households.
Meanwhile, a new research from the consumer group Which? that said the price of some goods had jumped by as much as 25 per cent in April, compared with the same month last year with dairy products such as cheese seeing the biggest rise.
The consumer group said it was “concerned the voices of millions of people” struggling with soaring food inflation had not been heard at the summit.
“Families up and down the country are facing a daily struggle to put food on the table and it’s clear the big supermarkets could…make available a range of healthy budget foods available in all shops,” it said.