Food Inflation Hits Concerning 45-Year High

Main points

• Annual consumer price inflation decreased from 10.4 per cent in February to 10.1 per cent in March. This fall was largely driven by price decreases in transport (specifically motor fuels) which were partially offset by price increases in food and non-alcoholic beverages, as well as recreation and culture. This marks the seventh consecutive month of double-digit CPI inflation and the twentieth consecutive month that this rate has been above the Bank of England’s target.
• Food inflation rose to an annual rate of 19.1 per cent in March from 18.0 per cent in January – the highest rate for this category observed in over 45 years. This is concerning since there is no government support to help households (especially lower income households, who spend a greater part of their incomes on food) offset this cost.
• NIESR’s measure of underlying inflation, which excludes 5 per cent of the highest and lowest price changes, rose to a new series high of 9.9 per cent in March from 9.7 per cent in February. At the same time, the ONS’s measure of core inflation – CPI excluding food, energy, alcohol and tobacco – remained flat at 6.2 per cent. These figures suggest that we have yet to see a meaningful turning point in underlying inflationary pressure in the UK.
• NIESR’s measure of underlying inflation rose in each of the 12 UK regions. It is notable, however, that regional trimmed-mean inflation dispersion has risen for a second consecutive month. For instance, the North of England experienced a trimmed-mean inflation rate of 10.70 per cent in March, while Northern Ireland experienced 8.89 per cent.

“Annual CPI inflation fell to 10.1 per cent in March from 10.4 per cent in February, driven by price decreases in transport that were partially offset by price increases in food and non-alcoholic beverages, and recreation and culture. Though a fall in the headline rate is welcome, this marks a concerning seventh consecutive month of double-digit inflation. Further, food inflation rose to 19.1 per cent in March from 18.0 per cent in February; this is particularly worrying as it will be impacting lower-income households disproportionately.  Core inflation remained flat at 6.2 per cent in March while NIESR’s measure of trimmed-mean inflation rose to a new series high of 9.9 per cent in March from 9.7 per cent in February. Clearly, inflationary pressures remain persistent, possibly warranting a need for the MPC to raise rates further next month. “

Paula Bejarano Carbo
Associate Economist, NIESR

For a breakdown of what inflation is and how it is calculated, read our blog post here.