Food inflation in the UK accelerated to record levels over the Christmas season, making it “challenging” for many households, according to industry groups.
Food inflation in December 2022 rose to 13.3% from 12.4% in November. That’s the highest food category inflation on record, according to the latest BRC-NielsenIQ store price index compiled by the British Retail Consortium (BRC) and business consultancy NielsenIQ.
Fresh food price increases have accelerated further. He rose from 14.3% in November to 15% in December. It is also the highest inflation rate ever in the fresh food sector.
Prices for shelf-stable foods such as pasta and canned goods rose 11% year-over-year in December, also setting a new record.
BRC CEO Helen Dickinson said: Not only has the cold snap forced people to spend more on energy, but the prices of many essential foods have also increased as the cost of feed, fertilizers and energy continued to rise in the aftermath of the war in Ukraine. ”
Overall store price inflation eased slightly to 7.3% in December from 7.4% in November, according to the latest indices. But it remains close to a record high.
The overall easing was due to a slowdown in non-food inflation, which fell to 4.4% from 4.8% in November.
Dickinson said: The compounding effect is that price gains have leveled off overall, with lower non-food inflation offsetting higher food prices. ”
Weakening consumer demand
She said 2023 “will be another difficult year for consumers and businesses as inflation shows no signs of abating.”
Retailers “will continue to work hard to support customers and keep prices low,” she said.
She urged the government to “quickly clarify what future support will look like” as retailers could see their energy bills rise by £7.5bn ($9bn) when the scheme expires. , adding that consumers may have to pay a price.
Mike Watkins, head of retail and business insights at NielsenIQ, also expects consumer demand to weaken in the new year.
he said: As such, rising food inflation will put additional pressure on household budgets, and it is unlikely that consumer attitudes about personal finances will improve in the near future.
“With shoppers paying for essential groceries and spending less money on discretionary retail, there is little to stimulate demand across non-food channels.”
Soaring household borrowing
Rising costs of living have also led to a surge in credit card borrowing in the pre-Christmas period.
Bank of England figures show that in November 2022, UK households took out a further £1.5bn ($1.8bn) of consumer credit, up from £748m ($900m) in October.
Additional borrowing in November was £1.19bn on credit cards (the highest since £1.28bn was borrowed in March 2004) and £1.2bn from other forms of credit such as car dealership finance and personal loans3. split into £17million.
Karim Haji, Head of Financial Services at KPMG, said: Going into 2023, the economic downturn is expected to last well into the year, so we need to be cautious. ”
“Discretionary spending this Christmas will take a toll, but inflation in essentials and rising energy costs mean we’re still accumulating debt for food, lighting, and heating.
Mortgage approvals for homebuyers fell to their lowest level since June 2020 in November, according to the FDA. Bank of England Money and Credit Report.
Mortgage approvals for home purchases were 46,100 in November, down from 57,900 in October.
Gareth Lewis, commercial director of MT Finance, a real estate finance company, said:
“[House] With purchase approvals declining and interest rates continuing to rise, many are stopping in November to stock up and question how high it will go and whether they can afford the purchases they were considering. It shows that you are thinking about
“People who are not forced to move may be wondering whether they should put that purchase on hold for now and wait until the outlook becomes clearer.
“Rising credit card debt reinforces this as the cost of living is rising along with interest rates.”
PA Media contributed to this report.