Food and drink prices are rising at their fastest rate since January last year in a painful new supermarket squeeze on household budgets.
On a monthly basis, food and non-alcoholic beverages prices rose by 0.4% in August, compared with a rise of 0.2% a year ago.
The overall headline rate of inflation as measured by the Consumer Prices Index was unchanged at 3.8%.
Biggest price rises in food and drink
ONS figures
24.9% Beef and veal
18.9% Butter
15.4% Coffee
15.4% Chocolate
12.6% Milk
Some of the biggest rises were seen in everyday staples such as butter, up 18.9% in a year, coffee (15.4%), chocolate (15.4%) and milk (12.6%). The price of beef and veal is 24.9% higher amid global falls in production.
Food manufacturers and retailers have been hit by a huge range of cost pressures ranging from new and increased taxes such as higher employer National Insurance Contribution rates and the new EPR “packaging tax” as well as poor harvests around the world and the UK for some key food commodities such as coffee beans.
Economists fear food inflation could peak at as much as 6% towards the end of the year.
Danni Hewson, head of financial analysis at brokers AJ Bell, said: “For households, the unwelcome increase in food prices for the fifth month in a row leaves little wiggle room. Whilst we are nowhere near those double digit increases that peaked in early 2023, consumers are becoming increasingly concerned.
“They’ve already traded down to generic brands and changed buying habits, and despite inflation-busting pay increases for many, few people feel they’re better off today than they were a couple of years ago.
“Businesses from food producers to supermarkets and restaurants have warned that they would need to pass on rising labour costs to their end consumer and this latest set of figures suggests that’s exactly what is happening.
Giles Hurley, the chain’s UK and Ireland chief executive, said inflationary pressures affecting shoppers were “persistent and urgent”.
Interest rates decision due tomorrow
The overall rate of inflation remains stubbornly higher than the Bank of England’s target of 2%, making it highly unlikely that interest rates will be cut again tomorrow.
Professor Joe Nellis, economic adviser at accounting firm MHA said: “Today’s figures are not good viewing for those hoping for a cut to interest rates when the Monetary Policy Committee (MPC) meet tomorrow. With wage growth and services inflation running hot, the MPC is very likely to keep rates on hold.
“However, given the economy is growing slower than desired, we expect at least one more interest rate cut before the end of the year — as long as inflation doesn’t escalate much further.”
Suren Thiru, Economics Director at accounting body ICAEW, said: “This data confirms no respite yet for those households and businesses struggling with eyewatering financial pressures, as rising fuel costs helped keep inflation dishearteningly above the Bank of England’s 2% target.
“August’s unchanged outturn could be followed by an unnerving upswing this month with skyrocketing business costs and food prices likely to see inflation breach the 4% mark in September, despite a weakening economy.”