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A slowdown in the soaring rate of food prices and falling fuel prices have contributed to UK inflation dropping to its lowest level in more than a year, according to the latest data this morning.

The headline rate fell more than expected in the 12 months to June, down to 7.9% from 8.7% in the previous month, the Office for National Statistics (ONS) reported.

A marked drop in prices at the petrol pumps (down 22.7%) made the biggest contribution to slowing inflation, but food prices also rose less quickly than a year ago while still remaining high.

Food and non-alcoholic drinks prices jumped 17.3% in the year to June, which is down from 18.3% in May. It comes after Kantar yesterday reported a fourth consectutive month of slowing inflation in the industry.

Prices of alcoholic beverages and tobacco were up by 9.2%, only slightly down on the 9.3% rise in May.

FDF chief executive Karen Betts called the slowdown “encouraging” and said she hoped inflation would continue to fall steadily over the coming months.

“However, food and drink manufacturers’ costs remain 33% higher than they were three years ago,” she added. Our sector is still dealing with many higher-than-normal ingredient costs and volatile and higher-than-normal energy prices, alongside persistent labour shortages.”

“Food manufacturers continue to do all they can to keep prices rises to a minimum, making savings wherever possible while paying a fair price to their suppliers.”

BRC CEO Helen Dickinson said efforts by retailers to curb price rises appeared to be paying off, with prices for cheese, fruit and fish all down.

“Falling inflation rates are welcome news, and a clear sign that competition is bringing down prices wherever cost pressures ease,” she added.

“Retailers are doing their bit but government also has a role to play to bring inflation down: the upcoming Deposit Return Scheme and reformed packaging levy would saddle retailers with another £4bn in costs, putting renewed pressure on prices. Government should reconsider the timelines for these interventions especially on the back of costs arising from Windsor Framework labelling, and upcoming increases to business rates.”

Morning update

Bakery group Finsbury Food has boosted sales to record levels in the year to 1 July with a “resilient” performance in the face of “persistent significant cost inflation and macroeconomic uncertainty”.

Total revenues for the year rose 16% to £413.7m, including a contribution from acquired meringue maker Lees Foods, the group said in a pre-close trading update.

The performance ramped up in the second half of the year, with sales up 17.1% versus the same period in 2022.

Finsbury said the growth had been driven by price and the incremental volume from Lees.

The core UK bakery division delivered a “robust” performance, with a 14.5% sales increase versus the prior year, while overseas performed “strongly”, up 25% year on year.

The strategic acquisition of Lees further consolidated Finsbury’s position in the sweet treats sector and grew its manufacturing presence in Scotland.

CEO John Duffy said: “The record revenue performance, which is in line with market expectations, that we have delivered this year is testament to the ongoing demand for our products and the resilience and determination of the business.

“Across the group, we have seen a stable performance in UK retail, ongoing recovery in UK foodservice and continued growth in our overseas division.”

He also thanked the Finsbury team for “hard work and dedication during what has been a testing year”.

Duffy added: “Whilst the challenges that we have faced over the past few years have been significant, and are likely to remain in the short-term, Finsbury has proven itself to be an adaptable and resilient business.”

The FTSE 100 jumped 1.2% to 7,544.93pts this morning on news of better-than-expected inflation figures.

Finsbury nudged up 0.6% to 96.1p on its positive trading update, while Ocado lost some of yesterday’s big gains, dropping 1% to 685p.

Risers so far included Fever-Tree, up 6.6% to 1,384p, Supermarket Income REIT, up 6.4% to 78.5p, and C&C Group, up 4.2% to 143.6p.

PayPoint, Bakkavor and Naked Wines were all early losers, down 2.7% to 440.9p, 1.1% to 98.9p and 0.6% to 78p respectively.

Yesterday in the City

Ocado shares surged more than 19% to 693p despite the group revealing its biggest-ever half-year loss. Optimism over underlying profitability and momentum in the technology operation boosted the stock to its highest level since February.