In a notable economic development, the latest official figures reveal that food prices experienced a monthly decrease for the first time in two years during September. However, the same data also highlighted a significant surge in fuel prices.
According to the Office for National Statistics (ONS), this reduction in food prices occurred simultaneously with a stabilization in the overall rate of inflation at 6.7%, bringing an end to three consecutive months of declining inflation. Notably, the cost of staple grocery items like milk, cheese, and eggs saw a decrease, providing a welcome relief for consumers and their supermarket bills.
Despite expectations among analysts of a slight drop in the overall inflation rate, the ONS reported that the figure remained unchanged, which may have caused some disappointment among market observers. Grant Fitzner, the ONS’s chief economist, clarified the situation in an interview with BBC Radio 4’s Today programme. Fitzner noted that the experience of other European nations has included periods of unchanged or increased headline inflation rates before experiencing further declines, providing context to the British scenario. He emphasized that despite possible disappointment, the UK had witnessed substantial drops in headline inflation over the past six months.
For the past two years, food prices have experienced significant upward pressure due to supply chain disruptions and the situation in Ukraine. On an annual basis, food price inflation continues to register at high levels, with a 12.2% increase recorded for September. However, a noteworthy shift has begun as monthly food prices dipped by 0.1% between August and September. The reduction was particularly led by the dairy and soft drinks categories. In contrast, the category of fish experienced an increase in prices, driven by higher costs for frozen prawns.
While food price inflation shows signs of slowing, drivers are grappling with an increase in fuel costs, coinciding with the rising global oil prices. Between August and September, the average price of petrol surged to 153.6p per litre, with diesel prices rising by 6.3p to 157.4p per litre.
The increase in oil prices can be attributed to a recent decision by Saudi Arabia and Russia, members of the Opec+ cartel of oil-producing nations, to reduce production levels to support global oil markets. Simultaneously, events in Israel and Palestine have sparked concerns over potential further price hikes.
Addressing these concerns, Treasury minister Andrew Griffith expressed apprehensions that the ongoing conflict in the region could indeed impact fuel prices if it escalates. Grant Fitzner emphasized, “The current conflict in Israel and Palestine is in an area of non-oil producers, but obviously, if this conflict spreads, it could be disruptive.”