- Written by Noor Nanji and Faisal Islam
- BBC News
The slowdown in food prices was helped by a surprise drop in inflation in August, with the cost of living now at its lowest level in a year and a half.
Official figures show that inflation, which measures how prices change over time, fell to 6.7% in the year to August, down from 6.8% in July.
This is the third month in a row that this number has decreased.
The rise in the prices of milk, cheese and eggs was the slowest, while the prices of fish and vegetables also declined.
There was also a decline in hotel and airfare costs, despite higher fuel prices.
When the inflation rate falls, it does not mean that prices are falling, but rather that they are rising less quickly.
The August figure was surprising as many economists expected the number to rise due to higher fuel prices.
Treasury Secretary Jeremy Hunt said the news showed that “the plan to tackle inflation is working.”
“But it is still very high, which is why it is so important to stick to our plan to halve it so that we can relieve the pressure on families and businesses,” he added.
But Labour’s shadow treasurer, Darren Jones, said the sudden drop in inflation was “not soon” enough.
“[It] “It wouldn’t mean much to families across the country who can’t pay their bills.”
Food prices rose around the world after the Russian invasion of Ukraine, which was one of the factors causing prices to rise in supermarkets.
The war has disrupted supplies from both countries, which are major exporters of commodities such as sunflower oil, wheat and fertilizer.
But the rate of food inflation, although still very high at more than 10%, has slowed in recent months.
Price rises for food and non-alcoholic drinks fell to 13.6% year-on-year to August, down from 14.9% in July, according to the Office for National Statistics (ONS).
Grant Fitzner, chief economist at the ONS, said the picture remained mixed, with prices of some items such as bread and cereals still rising, while others were falling.
“In the last month we have seen a decline in fish, oils, fats and vegetables,” he told BBC Radio 4’s Today programme.
He added that “food manufacturers are paying less for food than last year,” and this is “beginning to trickle down to consumers.”
Nick Collins says customers are still spending despite rising prices.
This decline is likely good news for consumers who have seen their shopping and restaurant bills rise.
Nick Collins runs Lounges PLC, which owns cafes, bars, restaurants and roadside eateries. He told the BBC that rising food costs forced him to raise prices by 8% across the company over the past year.
“In normal years, we would raise our prices by about 1.5% or 2%,” he said.
However, Collins said he had seen “no shift at all in customer behaviour” and that people had “not tightened their belts”.
“If that were the case you would have seen fewer people going out at the beginning of the week. You would have seen less spending as payday approached… We didn’t see any of that.”
What does this mean for interest rates?
Since December 2021, the Bank of England has raised interest rates 14 times in a row to try to curb rising prices.
But these latest numbers raise questions about whether the bank will increase them again at its next meeting on Thursday.
Although inflation remains high and well above target, it has now fallen for three months in a row.
Overall, this will give some support to officials at the bank’s Monetary Policy Committee – which sets interest rates – who want to limit further interest rate rises. Another rise is still possible tomorrow, from 5.25% to 5.5%, but this could be the last.
The latest inflation data also indicates that the government is likely to fulfill its pledge to halve inflation this year.
Speaking to reporters on Wednesday, the Chancellor said: “Independent forecasters say we are on track to meet the Prime Minister’s target, so let’s see what happens.”
The UK inflation rate remains high at 6.7% compared to other rich countries.
According to the latest figures, the inflation rate is 6.4% in Germany, 5.7% in France, 5.5% in Italy, and 2.5% in the United States.
How can I save money at my food store?
- Look at your closets so you know what you already have
- Head to the mini section first to see if it contains anything you need
- Buy items close to their sell by date which will be cheaper and use your own freezer
Additional reporting by Priya Patel and Raphael Sheridan.