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UK food inflation slows, but energy prices could lift inflation

UK inflation fell to 2.6% in the year to June, but analysts expect higher energy costs in July to push inflation back up.

Reported · Written up by our desk · Inflation

Food and non-alcoholic beverage prices in the UK rose at their slowest pace in nearly two years, helping bring overall inflation down to 2.6% in the year to June, from 2.8% in the year to May, according to the UK Office for National Statistics.

The slowdown was driven by cheaper fuel and staples such as margarine and sugar, with supermarket price competition also cited as a factor by the industry. June also saw lower clothing costs due to summer sales, while meat prices, including beef, rose but by less than in the same period last year.

Analysts cautioned the drop may be temporary, pointing to expected higher energy prices in July that could lift inflation again. Falling fuel prices in June followed lower pump prices after the US and Iran agreed to halt military operations and allow the Strait of Hormuz to re-open, but analysts flagged that renewed hostilities and a jump in crude oil prices raise the risk of inflation spiking later.

Fuel and food inflation dynamics could also reflect delays in the way supply chain effects filter through to supermarket prices. The British Retail Consortium attributed lower food inflation to “intense competition between supermarkets,” while UK officials said the lower inflation rate is welcome but more cost of living support is still needed.

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