Have we peaked? Food inflation outlook.
With the twelve-month rate for CPI food inflation reaching 16.5% it feels like we are getting closer to peak food inflation. Our Procurement and Sustainability Director, Mike Meek, provides an update on the food inflation outlook for 2023…
The IGD recently forecasted that food inflation will peak at 17 to 19 % in early 2023 and then begin to slow over the next twelve months.
This seems to be supported by the October ONS Producer Price Inflation data. It reports that UK food manufacturers are still experiencing increases in the price of goods bought with the latest monthly change at 1.7%.
It is still a very uncertain market to forecast.
Global commodity prices are still 50% higher than pre pandemic levels, though the effects of covid disruption on supply chains are diminishing.
We could expect that the current global economic slowdown and the UK recession would lead to falling demand and act as a downward pressure on prices from a supply side, and that better weather in 2023 post La Niña would lead to improved harvest yields. To the contrary, constraints on supply as a result of the war in Ukraine, coupled with its importance as a global food exporter, and high gas prices may equally keep prices stubbornly high.
This is manifested in industries facing very high input costs like the UK egg industry where energy and feed costs have led to a decline in the national flock, causing market failure and a decline in self-sufficiency.
We will continue to keep you abreast of product availability and pricing challenges into the new year and continue to negotiate on behalf of clients, making proactive product switch recommendations as needed.