June Sees Lowest Food Inflation in Months as Retailers Invest in Operations and Supply Chains

Investments in Operations and Supply Chains Drive Sales as Retailers Discount in June

In June, retailers made significant investments in their operations and supply chains while also focusing on driving sales through discounts. The British Retail Consortium (BRC) reported that food inflation has reached its lowest level since December 2021, primarily due to easing costs for key products like butter and coffee.

According to the shop price index compiled by the BRC and NielsenIQ, food prices experienced a deceleration for the 14th consecutive month, with an average inflation rate of 3 percent in June. This marks the lowest level of inflation in the food category since December 2021. Both fresh and ambient foods saw a drop in prices, falling below the three-month average rate.

In the fresh food category, inflation slowed to 1.5 percent, which is lower than the three-month average of 1.9 percent and the lowest rate since November 2021. Ambient foods, including pasta, spices, flour, and oils, also saw a decrease in inflation from 4.8 percent in May to 3.9 percent in June. This represents the lowest rate since April 2022 and is below the three-month average of 4.5 percent.

These price reductions can be attributed to retailers’ efforts to mitigate the impact of global shocks on input costs. Over the past several years, UK businesses have faced disruptions to global supply chains and market instability due to various factors such as conflicts in Ukraine and the Middle East, the COVID-19 pandemic, increased tension in the Taiwan Strait and South China Sea, and attacks in the Red Sea and Gulf of Aden.

To combat these challenges, retailers have heavily invested in their operations and supply chains. This investment has paid off, with shop prices rising by just 0.2 percent over the past 12 months. BRC Chief Executive Helen Dickinson stated that falling prices for key products like butter and coffee have contributed to lower food inflation, which is now at its lowest point since 2021.

Discounting Strategies and the General Election

In June, retailers employed discounting strategies to drive sales, resulting in deeper deflation in non-food prices. For example, TV sets were discounted to capitalize on football fever surrounding the 2024 UEFA European Football Championship. The slowdown in food price inflation news comes just two days before the general election, where economic growth has been a key focus for political parties.

Policymakers have pledged to address inflation and interest rates, boost business investment, and alleviate the pressures of the cost-of-living crisis. BRC Chief Executive Helen Dickinson emphasized the importance of retailers’ efforts in cutting costs and prices, which ultimately eases the cost of living for millions of households. She also highlighted the correlation between rising business costs and consumer price increases.

Addressing Major Cost Burdens for Retailers

The BRC has called on the next government to address significant cost burdens faced by the retail industry. These burdens include the business rates system and the apprenticeship levy. By addressing these challenges, retailers will be able to invest in lower prices for the future, thus reducing the cost of living pressures that many families face.

Shop Price Inflation Eases

The BRC also reported that shop price inflation has been easing. It decreased from 0.6 percent in May to 0.2 percent in June, marking the lowest annual growth since October 2021. This is good news for shoppers as they plan their household budgets for essential goods and services. With uncertainty surrounding discretionary spending, intense competition across the marketplace is expected to keep price increases as low as possible this summer, according to Mike Watkins, head of NielsenIQ.

Food Banks and Call for Supportive Social Security System

While the cost of food seems to be on a downward trajectory, there is still a growing number of Britons relying on food banks. The Trussell Trust reported a 37 percent increase in the distribution of emergency food parcels between April 2022 and March 31, 2023, compared to the same period last year. Emma Revie, Chief Executive of the Trussell Trust, emphasized that food banks should not become the new norm and called on the new government to deliver a supportive social security system.

In conclusion, June saw retailers investing heavily in their operations and supply chains while also focusing on driving sales through discounts. Food inflation reached its lowest level since December 2021, with the cost of key products like butter and coffee contributing to this decline. Retailers’ efforts to cut costs and prices have resulted in a minimal rise in shop prices over the past year. As the general election approaches, policymakers have pledged to address inflation and interest rates while alleviating the cost-of-living crisis. The BRC has called for the next government to tackle major cost burdens faced by the retail industry. Despite these positive developments, food banks continue to be a necessity for many, highlighting the need for a supportive social security system.