19 June 2024

What does lower inflation mean for your food shop?

19 June 2024

As inflation begins to ease, many of us are eager to know about how this will impacts our weekly food shops.

New statistics published by the ONS Consumer Prices Index revealed that May’s inflation rate was 2%, the first time it has hit this level for nearly three years.

Here, finance experts unpick some of the puzzling financial trends and make suggestions on how to save money on food.

What is lower inflation and how will it impact our everyday lives?

Lower inflation means the rate prices are rising has slowed down.

Amy Knight, personal finance expert and small business commentator at NerdWallet UK, says this is a very good sign which indicates that our finances should slowly improve.

“Reaching the government’s target of 2% inflation is a relief for everyone, and the latest Consumer Price Index data shows the economy could be getting back on track,” says Knight. “It’s been a painful journey to get here with interest rates up higher than they’ve been for many years, but the country can now afford to be cautiously optimistic that our finances will improve.”

Over the last few years many families have struggled to get by as household bills, especially food prices – which are impacted by a multitude of factors including weather and geopolitics – have soared.

“Rising costs of raw materials, production challenges, fuel hikes, supply chain issues, labour shortages, and geopolitics all contribute to higher consumer prices,” explains Yiannis Zourmpanos, consumer trends analyst and financial consultant at Bountii. “Weather risks and international conflicts can also influence commodity availability and pricing volatility.”

Will supermarket food get cheaper? 

Although inflation has decreased, the impact that this will have on our weekly shop is likely to be a slow and gradual process.

“Consumers shouldn’t be expecting any dramatic price reductions any time soon,” says Michael Brown, senior research strategist at Pepperstone. “While headline inflation has now returned to the Bank of England’s 2% target for the first time since July 2021… this does not imply prices falling any time soon, simply prices rising at a slower pace, at best holding steady.”

The ONS data shows there have been sharp slowdowns in the average price of breakfast cereals, crisps, chocolate, pasta and couscous, and pizza and quiche.But Zourmpanos says shoppers should be “cautiously optimistic” about the impact lower inflation will have on supermarket shop.

“Customers can be cautiously optimistic that price increases may start to slow down from the very high rates we’ve seen recently,” says Zourmpanos .”Some products like milk, butter and toilet paper are already coming down in price, so shoppers could see more of that trend.”

But the prices of different foods will continue to rise at varying speeds. “Overall, it’s likely we’ll see a mixed picture,” explains Zourmpanos. “Some essentials could stabilise or even fall if production costs decrease.”

Many products recorded a negative inflation in May. The average cost of fresh or chilled fish was down 2.6% in the 12 months to May, while cheese and curd fell more steeply in May (down 3.9%) than the month before. Prices of jams and marmalades, low-fat milk and butter also fell.

Factors such as commodity and fuel prices also significantly influence the price of different products.

“When grain or fuel prices drop, that saving can trickle down sooner for some groceries,” explains Zourmpanos. “However, perishable or imported items prone to disruptions may lag in passing reductions to buyers.”

What types of food should I be buying and avoiding?

Looking out for supermarket’s own branded products and opting for canned and frozen food over fresh could help you save some cash on some pantry essentials.

“Value-range store brands continue to be a budget-friendly alternative for affordable everyday staples,” says Zourmpanos. “Frozen, dry and canned goods usually maintain affordability through periods of escalating costs as well.”

He also recommends checking unit prices, and looking out for sale ads as well as meal planning around discounted reduced for quick sale items.

Shopping around could also be a great way to save some cash, adds Knight.

“There are savings to be had by switching up your choice of supermarket,” says Knight. “Research by NerdWallet UK has shown that reducing expenditure on non-essentials is one the most commonly used tactics for adults in the UK who are trying to save money. ”

You might also want to think twice before adding a ready meal or pineapple to your shopping basket.

“Prices are stubbornly high still for meat, eggs and dairy due to persistent input price inflation,” says Zourmpanos. “Tropical fruits are also expensive since fuel surcharges persist and ready-meals remain pricey due to packaging materials hikes.”

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