Olive oil, sugar, and low-fat milk prices have increased as food costs continue to fuel inflation in the United Kingdom.
All items jumped by more than 40 percent from December to January, according to official data, with food inflation maintaining at a 45-year high.
A Co-op Food executive predicted that supermarket prices will continue to rise this year.
Inflation in the United Kingdom dipped to 10.1% in January, from 10.5% in December, as gasoline prices and the cost of dining out fell.
The Office for National Statistics (ONS) monitors the prices of hundreds of commonplace commodities to compute inflation, which measures the increase in price over time.
If it lowers, it does not indicate that goods prices are decreasing; rather, it indicates that prices are rising more slowly.
In addition to energy costs, the cost of food is one of the primary factors driving total inflation. The annual increase in food costs was 16.7% in January, down slightly from 16.8% in December.
Olive oil prices increased by 44.6%, while low-fat milk costs increased by 45.5%. Butter and egg costs increased by more than 20%, while cheese prices increased by more than 30%.
Matt Hood, managing director of Co-op Food, which operates more than 2,500 stores in the United Kingdom, stated that prices continued to rise in January as costs for grocers rose, making business “very difficult.
Inflation is what keeps us awake at night,” he said on the BBC’s Today show.
“Whether you believe it or not, retailers are making every effort not to pass it on to customers.”
Olive oil output is affected by heat waves
Since Russia invaded Ukraine about a year ago, both food and energy costs have increased due to disruptions in the supply of both commodities.
In the case of olive oil, however, supply shortages caused by summer heatwaves in Spain, a major supplier of the product, have contributed to higher pricing.
Kyle Holland, analyst of oils and oil seed prices at commodity pricing data company Mintec, stated that due to dry weather, olive trees produced fewer olives last year, resulting in a decrease in Spain’s production to 720,000 metric tonnes from the typical 1.5 million tonnes.
“When there is insufficient precipitation, [olive trees] cannot yield olives. Many trees have not produced enough fruit. This is a severe decline “he added.
After reaching its peak in October, the cost of living may finally be beginning to decline, according to some economists.
However, at 10.1%, the rate of price increases remains well above the Bank of England’s 2% inflation objective.
February 1982 was the last time inflation was above the current level, excluding the last year in which it has been growing.
Between October and December 2022, compensation, excluding bonuses, grew by 6.7% annually. Inflation-adjusted regular salary, however, declined by 2.5% over the same period.
Kelly Hill, an apprentice at Francesco’s hair salon in Stafford, moved back in with her parents to save money for a down payment on a house.
The 31-year-old stated that it was “tough” not to be able to live independently and that she feared she would never be able to do so again.
She stated that interest rates, property prices, and everything else has increased.
Kelly reported that her parents had seen that food prices had “gone through the roof.”
Grant Fitzner, the chief economist for the ONS, stated that there are indications that company costs are “increasing more slowly,” but he cautioned that “enterprise prices remain high overall, especially for steel and food products.”
After a “substantial increase” in December, he stated that flight and bus travel costs had decreased. “Petrol prices continue to fall, and pricing at restaurants, cafes, and takeout establishments have decreased,” he added.
However, these declines were countered by increases in alcohol and tobacco prices.
Chancellor Jeremy Hunt also cautioned that the “battle against increasing prices is far from done” and that the government must thus “stick to the strategy to half inflation this year, cut debt, and develop the economy.
Although the government has committed to cut inflation in half, many experts believe it will happen spontaneously as energy prices decline.
Rachel Reeves, the shadow chancellor, stated that people would not be better off after 13 years of Conservative rule and reiterated Labour’s request for increased taxes on oil and gas corporations to reduce bills when energy costs increase in April.
The largest element lowering inflation is the price of gasoline, which is now only 2 pence per liter more than it was before Russia invaded Ukraine.
Because inflation compares last month’s prices to those of the previous year, the rate of inflation will almost certainly decrease in the coming months.
Last year at this time, fuel prices were already on the rise, but the war propelled the price of gasoline and wholesale gas into the stratosphere.
In two months, we will compare prices in March 2023 to those in March 2022, after the gasoline price has increased, and the gap – the inflation rate – will be less. This will occur regardless of the actions taken by the government or the Bank of England.
Importantly, the Bank of England’s major concern that global inflationary pressure is becoming domestically entrenched will have been alleviated. This undermines the case for rising interest rates more rapidly.
The decline in inflation, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics, gives the Bank of England the “flexibility” to retain its interest rate at 4% rather than hike it again.
At the beginning of the month, the Bank raised rates for the tenth consecutive time to contain growing prices.
Raising interest rates is viewed as a means to limit inflation by making borrowing money more expensive, so encouraging individuals to borrow less, spend less, and save more.
With projections that the United Kingdom could enter a recession – a period of economic downturn – this year, it is a delicate balancing act for the Bank of England not to overly slow the economy.
