Rising fuel prices nudged annual inflation up to 3.3% in March, up 0.3 percentage points on February.
Alongside a 0.4 point jump in food inflation to 3.7%, rising prices at the pump have become the first sign of the coming squeeze on consumers from the Iran War.
On a monthly basis, inflation edged from a standstill in February to a 0.7 point increase, the largest single-month jump since April 2025.
Yet at 3.3% the annual CPI index remains just below levels of inflation seen throughout most of 2025, as intense competition continued to push clothing and footwear into deflation, and alcohol and tobacco prices rose less steeply.
Food inflation may soon “ramp up more notably” in 2026, said BRC economist Harvir Dhillon.
“Although the energy price cap and removal of green levies may provide some near-term relief, inflation will rise over the coming quarters as the full impact of the Middle East conflict filters through,” he said.
FDF chief economist Liliana Danila warned that it was a “only a matter of time”.
”The clouds are gathering, but the storm has not yet broken on rising food and drink inflation. The war in Iran has delivered a cost shock that is already too large for manufacturers to absorb in full. The impact on prices will take time to work its way through the system, but it’s only a matter of time before it does.
”For manufacturers, long-term contracts with suppliers and retailers mean it can take up to a year for higher costs to be fully passed through.
”But where products are less processed, or supply chains are shorter, prices will move more quickly. As a result, absent of any government intervention, we expect a gradual but persistent pick-up in food inflation, reaching around 9%-10% by the end of the year.
“This means we’re in a crucial window for action to limit the impact on shoppers. We’re working with government to look at the levers they can pull now to support food manufacturers now to soften the blow on consumers later in the year.”
Yesterday, the FDF accused the government of lacking “urgency” in its response to the impending wave of inflation. Calling on ministers to support food manufacturers with targeted energy support, chief executive Karen Betts said: “If we’re going to act, we need to act now.”
The FDF’s request for support came alongside calls from retail leaders for “immediate government intervention” to fight sector inflation. BRC director of food and sustainability Andrew Opie told MPs the sector needed help ofsetting costs now to ward off steeper inflation down the line.
No comments yet