Food inflation fall continues but remains above 20%

Stabilising factors such as food and oil factors are seen as major influences of the fall.

The CGA Prestige Foodservice Price Index has revealed a year-on-year (YoY) fall in food inflation to 20.6% in February 2023. This figure is lower than the record high of 22.9% in December 2022, indicating a slowdown in price increases. The full basket of food measured by the Index increased by only 0.7% month-on-month, one-third of the average rate recorded in the latter part of 2022.

All categories of the Index remain in double-digit inflation, with oils and fats achieving the highest rate of 37% YoY, and the sugars, jams, and syrups category having the lowest at 12%. 

According to CGA by NIQ, the dip in inflation is mostly due to the price of food, including oil prices, exchange rates, and commodity markets stabilising compared to 2022.

The UN FAO Food Price Index has continued its downward trend for the 11th consecutive month, averaging 129.8 points in February 2023, marginally down by 0.6% from January. This is a decline of 29.9 points (18.7%) from the peak of March 2022, reflecting significant drops in the price indices of vegetable oils and dairy, along with fractionally lower cereals and meat indices, more than offsetting a steep rise in sugar prices.

Lower consumer demand is beginning to impact sales volumes, which should help ease prices. However, energy and labour costs remain a significant challenge, so the rate of inflation decline may be slow for some time. 

“News of an easing in foodservice price inflation is very welcome after months of historically high numbers. Key indicators point to further respite as the year goes on, but commodity markets and oil prices remain vulnerable to various macro and micro pressures, so there is no room for complacency. With pressure on consumers’ spending continuing, trading conditions will remain very challenging for businesses across the sector,” James Ashurst, client director at CGA by NIQ, said.