Britons 'face expensive Christmas dinner' as food price inflation soars

Official figures show prices were up by 4.2% last month on 12 months earlier, the highest level in four years

Big increases in the price of fish, fats and vegetables have driven food price inflation to the highest level in more than four years.

New data from the Office for National Statistics (ONS) shows food prices last month were up by 4.2% on 12 months earlier, a sharp increase on the 0.6% that food inflation was running at just a year ago. The October increase is the highest since 2013 and prompted the British Retail Consortium (BRC) to warn that consumers face the prospect of an expensive Christmas dinner this year.

Among the sharpest price increases was an 8.5% rise in the price of fish, while vegetables were up 5.7%, fats and oils were up 5.6%, and milk, cheese and eggs have climbed 4.8%.

Other big price rises included an 8.5% leap in the prices of tea, coffee and cocoa over the past year and a 4.3% increase in beer prices.

However, cheaper fuel and deep discounting by hard-pressed retailers cancelled out the impact of higher food prices to leave the annual increase in Britain’s overall cost of living unchanged at 3% in October.

It was the second consecutive month that the government’s preferred measure of inflation – the consumer price index (CPI) – stood at 3%, confounding the Bank of England’s expectation of a small rise. Any inflation rate above 3% requires the Bank’s governor, Mark Carney, to write an explanatory letter to the chancellor, Philip Hammond.

Rachel Lund, the BRC’s head of retail insight and analytics, said higher food bills meant consumers were cutting back in other areas of spending, forcing non-food retailers to offer bargains. She warned: “It may be an expensive Christmas dinner this year as a [result] of more costly imports and higher world food prices, particularly for dairy products.”

Lund added: “With more of consumers’ incomes being absorbed in spending on food, retailers of non-food products are having to compete harder for business. In a dismal month for non-food sales, shoppers were offered significant discounts, leading to a drop in the inflation rate of goods such as furniture and clothing.”

Food price inflation graphic

The upward pressure on grocery bills was also underlined by new research from the market research group Kantar Worldpanel. This showed that food-price inflation – having fallen between September 2014 and 2016 – had picked up since the start of 2017 and now stood at 3.4% for the latest 12-week period monitored by the company. It pinpointed the fastest rising prices as butter, fish and cola and said prices were falling in only a few sectors, such as crisps and fresh poultry.

City analysts said inflation was likely to fall next year because the big drop in the value of the pound since the Brexit vote in June 2016 would cease to have a strong upward effect on prices.

For many retailers, however, the respite may come too late as the months leading up to Christmas are their busiest time of the year. The latest ONS figures suggest that clothing and furniture stores are being forced to trim prices to attract business.

Stephen Clarke, policy analyst at the Resolution Foundation, said poorer families would be hardest hit by the jump in food prices. “While the headline rates of inflation remained unchanged, the drivers of inflation have continued to shift – and are hitting less well-off families particularly hard,” Clarke said.

“Food and drink prices increased faster than at any point in the last four years, while clothing prices also rose at a rate above overall inflation. The rising cost of these basic items affects low- and middle-income households far more than better-off households, who are also being cushioned by static fuel costs.”

The ONS said both the headline CPI and a newer CPI measure that includes housing costs had remained unchanged last month – the CPI at 3% and CPI(H) at 2.8%. So-called core inflation – which excludes food, energy, alcohol and tobacco – remained at 2.7% for a third month.

Separate ONS figures for producer price inflation – a guide to price pressure at an early stage in the pipeline – fell back sharply last month.

The cost of goods leaving UK factories increased by 2.8% in the year to October, down from 3.3% in the year to September. Industry’s fuel and raw material bills rose by 4.6% in the 12 months ending in October, down from 8.1% in September.

James Smith, UK economist at ING bank, said the news on inflation would make Threadneedle Street cautious about further increases in interest rates following the quarter-point rise earlier this month.

“At 3%, inflation looks like it has peaked and without further signs of domestically driven price pressures, the Bank of England will tread carefully,” Smith said.

Chris Williamson, UK economist at IHS/Markit, said there would be “red faces” all round after inflation had failed to rise as expected, not least at the Bank of England.

“The recent surge in price pressures is primarily due to the depreciation of the sterling since last year’s EU referendum, which has increased the cost of imported goods and services, but today’s numbers will add to the sense that the worst of this impact has already passed. Data on company costs, which tend to change ahead of changes in consumer prices, are already showing signs of having peaked earlier in the year,” Williamson said.

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Larry Elliott Economics editor

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