RESEARCH | Staff Reporter, UK

Inflation easing but prices still rising: report

Volatility remains in some categories.

Inflation in the foodservice sector dropped in March from the record high of 9.8% in February, but prices are continuing to rise according to the Foodservice Price Index from CGA and Prestige Purchasing.

The index predicts market instability and Brexit uncertainty will combine to keep prices increasing in the months ahead, with fish continuing to be the most volatile category in terms of price movements.

"Prices here are well above the levels seen this time last year, and rose by 10% month on month. Salmon prices peaked in the run up to Easter, but with good weather this Spring and reduced demand, along with likely increases in cod and haddock landings, we expect to see some easing in this category," Prestige Purchasing said.

The Breads & Cereals category of the Index has also risen, and whilst there is a seasonal trend for price increases at this time of year, poor weather in the US is further firming global prices.

Significant winter storms and flooding from snowmelt also resulted in substantial losses of corn, wheat, and barley, and there is the prospect of significant delays to Spring plantings.

"This means the US may look more to imports, strengthening the grains market as a result," Prestige Purchasing said.

Per the research, the largest deflationary movement in March was seen in the Fruit category, where prices fell back substantially. Spanish citrus recently suffered from flooding, resulting in a climb in the Index since December.

“Whilst inflation, after a period of unprecedented increase, is now falling, we still remain in a period where each month sees further price increases in most categories. Operators in fixed-term pricing agreements can expect challenging negotiations when they emerge from their protection," Prestige Purchasing chief executive Shaun Allen said.

CGA Client Director for Food Fiona Speakman added: “While inflation appears to be slackening a little against the very high levels of recent times, there is still a significant degree of volatility across the sector. The sharp contrast between inflationary categories like Fish and deflationary sectors like Fruit shows that prices are very sensitive to market challenges and dynamics. Businesses will be hoping that general inflation continues to ease, but macro and micro challenges mean there is likely to be more instability ahead.”

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