UK Food Inflation Defied Forecasts as Supermarket Price War Takes Hold
UK food inflation has remained lower than expected due to intense competition among supermarkets and suppliers' resistance to passing on higher costs. According to the Office for National Statistics, food and non-alcoholic drink prices rose 1.7% in the year to June, down from 2.2% in May and marking the lowest annual rate since August 2024.
The Bank of England had forecasted a sharper increase, expecting food inflation to reach 4.6% by September, but its latest projections are more subdued with an expected rate of nearly 3.5% in December.
Supermarkets have been willing to sacrifice some margin to protect market share and prevent retailers from passing on the full impact of higher costs. Branded suppliers have also exercised restraint on price increases amid fears of pushing shoppers towards cheaper own-label alternatives.