Food inflation rises as supply chain faces ongoing challenges

According to the latest data from the British Retail Consortium (BRC), food price inflation stood at 4% in July compared to the same month last year, up from 3.7% in June. This figure also exceeds the three-month average of 3.5%.

While prices for fresh produce such as vegetables and fruit remained relatively stable at 3.2% inflation, prices for store cupboard items rose by 5.1%, compared with 4.3% the previous month.

Notably, the Office for National Statistics (ONS) recently reported that meat prices have climbed by 17% year-on-year, while butter, previously seeing price declines in late 2023, has surged by 18.2% over the same period.

The sharp increases are being felt by both consumers and the supply chain. For farmers and producers, rising input costs, particularly in labour, energy, and feed, have continued to drive up production costs. In turn, this is being reflected in shelf prices. Livestock producers have also faced volatile markets due to global supply chain disruptions and shifting consumer demand.

The BRC noted that global supply constraints for items such as meat and tea had contributed to sustained price pressures. Helen Dickinson, BRC chief executive, said July marked the sixth consecutive month of rising food price inflation.

While total shop price inflation, including non-food goods, remained relatively modest at 0.7% year-on-year in July (up from 0.4% in June), the cumulative effect of steady increases in food prices has created financial strain for households, especially those on fixed incomes.

From a retail perspective, the picture remained challenging. A separate survey from the Confederation of British Industry (CBI) reported that many retailers struggled through the summer period, with consumer confidence dented by economic uncertainty and cost-of-living concerns.

Although July was slightly better than June, the CBI found that the net balance of retailers reporting falling sales remained negative, easing only from -46% to -34%. Retailers anticipate that sales will continue to decline at a similar rate in the coming month.

CBI principal economist Martin Sartorius noted that high labour costs and ongoing economic uncertainty were key contributors to suppressed household demand. He added that the trend of cautious spending had been in place since autumn 2024, with more consumers prioritising savings over discretionary purchases.

For the farming sector, ongoing food price inflation remains a double-edged sword. While higher commodity prices can improve margins in theory, they often lag behind rising input costs and are subject to market volatility.

Retailer price resistance and the affordability crisis for consumers also limit how much of these increased costs can be passed on.

Looking ahead, attention will turn to how inflation trends into the autumn, and whether cost pressures ease for both consumers and those within the agricultural supply chain.