Is price inflation back? That is the $64bn question taxing retail and supply executives in the UK (and beyond) right now.
Over the summer, it looked as though the industry was finally getting a grip on inflation, as The Grocer Price Index (GPI) came crashing down from 3% to 1.6% in July. And though it crept up a smidge in August (to 1.8%), last year’s highs of 5%-6% seemed long forgotten.
The fear now is the lid is about to be blown off once again. And the fact that the country’s biggest newspaper put food price hikes on its front page, earlier this month, shows that inflation is once again back at the top of the political agenda.
The most obvious and high-profile event driving this is the drought in the US Midwest. But significant weather-related problems have been reported (here) from as far afield as Russia, Australia, South America and large swathes of Europe.
The dramatic, resultant return of price inflation in commodities such as wheat, maize and soy beans, should give real cause for concern. We’ve identified the 10 categories most at risk (p14), and in some, such as bread and poultry, prices have either increased already, or are likely to do so very soon indeed.
However, with so much bad weather news around, the fear is always that prices will rise, everywhere. And that is sometimes a dangerous assumption to make, with potentially significant health as well as economic ramifications. As a survey by The Grocer reveals this week, a staggering 70% of fresh vegetables have either remained at the same price or grown cheaper this year (p4), despite our own well-documented weather woes, as a spring and summer washout followed the winter drought to destroy or delay crops across large parts of the country.
This story contains an important message as the population struggles to eat its five-a-day: many consumers are already put off healthier options because they assume fresh veg is expensive. A constant barrage of reports linking bad weather to higher prices can hardly help. Stripping inflation facts from food price fiction has never been more tricky, or more important.
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