Foodservice price inflation steadies for October

By Nikkie Sutton

- Last updated on GMT

Drop in costs: improved sugar supply led to a 6.1% fall in prices year on year
Drop in costs: improved sugar supply led to a 6.1% fall in prices year on year

Related tags: Foodservice price inflation, Inflation

Wholesale foodservice price inflation fell for the second month in a row last month (October) from 6.5% to 5.8%, according to the new edition of the CGA Prestige Foodservice Price Index.

It is the joint lowest monthly figure recorded by the index since February and an indication that inflationary pressures in the foodservice sector may be starting to ease.

There is cautious optimism that the costs of imports to the UK are settling after a year of historically high levels of inflation thanks to the effects of the post-Brexit exchange rate volatility now having filtered through to most categories of food and drink.

The index predicts further easing of pressures into 2018 and forecasts average inflation for the next 12 months of under 4%.

However, it also added that uncertainty around issues such as Brexit negotiations and the La Niña weather phenomenon – the direct opposite of El Niño and when sea surface temperatures in the central Pacific Ocean drop to lower than normal levels – may yet have a negative impact of the cost of food and drink items bought into the UK from overseas.

Notable easing

Despite two months of decline, foodservice price inflation also remains well above consumer-side inflation as measured by the Office for National Statistics.

The index revealed a notable easing of inflation in key categories including sugar, where improved supply led to a 6.1% drop in prices year on year.

Inflation was also held down in categories including meat and vegetables thanks, in part, to increased levels of domestic sourcing.

However, pressures on supply means price inflation continues to remain high in other categories such as fish and oils, and fats, where inflation is in double figures.

Concern over the availability of migrant labour after the conclusion of Brexit negotiations is meanwhile affecting categories like fruit, where UK producers have long relied on EU nationals for a large part of their workforces.

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CGA commercial director Graeme Loudon called the inflationary easing “encouraging”.

He said: “As we near the end of a year of very high inflation in foodservice prices, it is encouraging to see evidence that stresses may be easing in the latest edition of our index.

“The Government’s negotiations to leave the EU continue to have a significant knock-on effect on exchange rates and migrant labour, and the sector will need to keep a close eye on issues like La Niña.

“But the foodservice price index does at least suggest that a welcome degree of stability is starting to return to the supply chain.” 

Prestige Purchasing head of consulting and insight Christopher Clare said: “In a week where the Chancellor of the Exchequer announced changes to the calculation of business rates, the drop in inflation for product purchases will, of course, be further welcome news.

“Prices have now been broadly steady for about eight months, albeit at a higher base than a year ago – this might provide some relief for busy operators over the festive season.”

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