Inflation slides to 13-month low; Food prices remain near historic highs

Britain’s annual inflation rate struck a 13-month low in April, official data showed Wednesday, but remains elevated at 8.7 per cent as soaring food prices offset weaker energy costs, prolonging a cost-of-living crisis.

The rate of price increases slowed from 10.1 per cent in March, bringing inflation under 10 per cent for the first time since August last year, the Office for National Statistics said in a statement.

At 8.7 per cent, UK inflation is at the lowest level since March last year when the rate stood at 7.0 per cent, the ONS added.

“However, prices in general remain substantially higher than they were this time last year, with annual food price inflation near historic highs,” noted ONS chief economist Grant Fitzner.

While energy prices have slumped on easing supply concerns thanks to warmer weather in Europe and as nations become less dependent on Russian oil and gas, food costs continue to soar.

The annual inflation rate of food and non-alcoholic beverages only slightly eased, from 19.2 per cent in March to 19.1 per cent last month, around the highest level in more than 45 years.

“Droughts and floods in Europe and elsewhere have been disrupting supply chains and pushing up prices of food stuffs,” said Tom Lancaster, analyst at the Energy and Climate Intelligence Unit.

The price of natural gas, which is used to make fertiliser, remains high compared to before the Covid pandemic.

“Fertilisers applied to crops now will be adding to costs for food harvested later in the year,” Lancaster added.

Core inflation, which excludes energy, food and tobacco prices, rose to 6.8 per cent – the highest rate since March 1992.

Despite the sharp drop, April’s rate was above the Bank of England’s (BoE) prediction for inflation of 8.4 per cent last month.

Britain’s annual inflation rate in April was also the highest among countries in the Group of Seven rich economies featuring also Canada, France, Germany, Italy, Japan and the US.

The BoE’s target rate of 2.0 per cent remains very far off, while the UK government has said it sees inflation dropping to about 5.0 per cent by year-end.

Last month, “the rate of inflation fell notably as the large energy price rises seen last year were not repeated… but was offset partially by increases in the cost of second-hand cars and cigarettes,” Fitzner added.

The data comes one day after the International Monetary Fund delivered a major U-turn on its forecast for the UK economy, saying it expected growth this year just one month after predicting a contraction.

Britain’s economy is expected to expand 0.4 per cent in 2023, the IMF said in its latest outlook document, which cited weaker energy prices.

The IMF ripped up its previous forecast in April for a 0.3-per cent contraction.

“The IMF said yesterday we’ve acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast,” Chancellor Jeremy Hunt said following Wednesday’s data.