With inflation falling back to its lowest level since March 2022 surging food prices will be very worrying for families according to the Resolution Foundation.
CPI inflation fell back to 8.7 per cent in April – its lowest level since March 2022 (7 per cent) – driven by last year’s initial energy price shock falling out of the data. This pattern will be reinforced in the coming months as typical energy bills are set to fall by around £500 a year from July (though they will remain around 50 per cent above levels experienced before Russia’s invasion of Ukraine).
But while this was the biggest monthly fall in the inflation rate since 1992, it was nonetheless smaller than market expectations, with core inflation rising from 6.2 to 6.8 per cent.
Even as energy bills are easing living standards pressures, surging food prices area doing the opposite – rising by 19 per cent in April – and are expected to contribute around 2 percentage points to inflation over the coming months.
The Foundation notes that for the average family, annual food bills are on track to have increased by around £1,000 by July (compared to pre-pandemic levels), an even bigger cash increase than annual energy bills (£900) at that point.
It adds that poorer families are most affected by surging food prices as they spend a far greater share of their family budgets on food (14 per cent, compared 9 per cent for the highest-income households).
As a result, the effective inflation rate for the poorest tenth of households is around 2 percentage points higher than it is for the richest tenth of households.
James Smith, Research Director at the Resolution Foundation, said “Inflation has finally fallen back into single digits as the energy price shock last spring drops out of the latest annual inflation rate. But the cost of living crisis is evolving not ending – with surging food prices now taking centre stage.”
“Surging food prices are particularly painful for low-income families, three-in-five of whom are already reporting that they are having to cut back on food and other essentials.”