Despite prices going up in December because of the VAT increase and offers being cut back on staple items, inflation on food actually fell. James Ball reports

Something strange happened on supermarket shelves in December: prices went up, but inflation came down. This unlikely scenario serves as a warning to those who believe falling inflation will still mean cheaper food to shoppers – experts warn it will not.

Figures from The Grocer Price Index show that, on average, food in December cost 1.3% more than the month before. This was partly down to the VAT change being  introduced on some products a few days ahead of the new year, which pushed up prices at the end of the month.

VAT’s contribution to inflation was reflected in the category figures: health and beauty products experienced the highest monthly rise at 5.9%, a figure that corroborates reports retailers used the VAT hike to up some prices. Deli and dairy saw the smallest monthly rises, at 0.8% and 1.0% respectively.

Shifting promotional tactics ahead of Christmas also result in higher prices on staples in December when offers on everyday items are often scaled back in favour of Christmas lines, resulting in a jump in price. However, because this year’s 1.3% December price rise was smaller than the hefty 2.5% rise seen in December 2008, food price inflation – the year-on-year change in prices – continued to fall. Indeed it fell more than a third, from 2.8% in November to 1.6% in December. This time last year, the GPI stood at 15.1%, more than nine times its current level.

However, average food retail prices are about 20% higher than they were in 2007. According to ONS figures, the typical family spent £48.10 a week on food and non-alcoholic drinks. This is now likely to have risen to £57.72, meaning the typical household spends an extra £500 a year on food.

The English Food and Farming Partnership, which tracks food cost and affordability, predicts food price inflation will hold steady for the next six to nine months, but due to deflation in the overall economy, increasing unemployment and the higher level of food costs, food will continue to become less affordable for shoppers. The principal implication of this is that the value-for-money trend could run long into the recovery.