Why High Food Inflation in the UK is Pushing Consumers to Cut Back on Discretionary Purchases
The United Kingdom is experiencing high inflation in the food sector, prompting many consumers to cut back on discretionary items. According to data from trade association British Retail Consortium and KPMG consultancy, UK food sales rose by an annual rate of 9.6% in May, well above the 12-month average of 6.9%, while overall retail growth rate was the slowest in six months at 3.9%. Despite the decline, spending on pubs and takeaways increased significantly, with the former recording an increase of 6.4%, and the latter posting a 13% increase. Despite a decline in overall consumer spending – which rose just 3.6% in May – many consumers are reducing discretionary shopping to offset rising food prices, with clothing and restaurants being the hardest hit.
The grocery sector is the fastest growing part of consumers’ wallets, which means that they have to spend more on food as it becomes disproportionately more expensive. Hope remains, however, that inflation levels in the broader economy will continue to move in the right direction to bolster much-needed consumer confidence.
On a positive note, spending on fuel fell 10.7%, which helped the UK avoid a technical recession. The decline was due to lower energy costs since May last year when gas and petrol prices skyrocketed, following Russia’s full-scale invasion of Ukraine. While the decline helped prevent an economic contraction, the forward outlook suggests continued stagnation in the UK economy.
Why grocery spending is still increasing
Aside from high food inflation, Barclays data has cited two unique factors driving increased grocery spending – holidays to mark the Coronation Bank Holiday weekend and the Eurovision Song Contest. Indeed, rapid increases were recorded in supermarket spending, which rose 9.4% above May figures.
Meanwhile, spending on restaurants and on furniture and electronics all contracted from a year earlier, with household goods and clothing purchases down 4.2% and 5.1% respectively from May 2022. However, spending on pubs and takeaways remained steady. Esme Harwood, Barclays director, explained that while consumers were having to give up discretionary shopping to compensate for rising food prices, clothing and restaurants were being hit the hardest.
Overall, the pace of retail spending in May was subdued by non-food sales, which remained largely flat at 0.7%. BRC data is not adjusted for price changes, indicating that consumers bought fewer goods in May than in May 2022. Despite inflation decreasing less than expected between March and April, from 10.1% to 8.7%, official data demonstrated that food prices in the UK rose by an annual rate of 19.1%, down slightly from a 45-year high of 19.2% in March.
Summary
High food inflation in the United Kingdom has led to a rise in grocery spending, prompting many consumers to cut back on discretionary purchases. Data from the British Retail Consortium and KPMG consultancy reveals that UK food sales rose by an annual rate of 9.6% in May, well above the 12-month average of 6.9%, while overall retail growth rate was the slowest in six months at 3.9%. Despite the decline, spending on pubs and takeaways increased significantly, with the former recording an increase of 6.4%, and the latter posting a 13% increase. On the other hand, spending on restaurants and on furniture and electronics all contracted from a year earlier, with household goods and clothing purchases down 4.2% and 5.1% respectively from May 2022. However, spending on fuel fell 10.7%, which helped the UK avoid a technical recession. The decline was due to lower energy costs since May last year when gas and petrol prices skyrocketed, following Russia’s full-scale invasion of Ukraine.
Despite the grocery sector being the fastest growing part of the consumer wallet, causing customers to spend more on food as it becomes disproportionately more expensive, hope remains that inflation levels in the broader economy will continue to move in the right direction to bolster much-needed consumer confidence.
The UK’s inflation rates are affecting consumer behavior, as many have to compromise on their non-food purchases to accommodate their increasing food bills. Clothing and restaurants appear to be the hardest hit by the changing purchasing habits of UK consumers. Nevertheless, there are still opportunities to stimulate the economy, such as marking holidays to promote consumer spending, and improved goods pricing to lessen the impact of high inflation rates.
Additional piece
Food Inflation: Short-Term Pain for Long-Term Gain?
Food inflation is having a significant impact on the UK economy, with Britain’s food prices rising faster than those in other European countries. A weak pound, coupled with a surge in global food prices, has led to a significant rise in food prices; and retailers passing on the additional costs to consumers.
The surge in food prices began in 2021 and has continued to rise throughout 2022. Despite some predictions that the inflation would subside, the recent data from the UK is indicating otherwise. The main repercussion of this inflation is that consumers have less disposable income, and they’re buying fewer expensive items.
Food inflation: a global issue
The UK’s experience is not unique, with other countries experiencing similar scenarios. Food prices continue to rise globally, with the impact spreading far and wide. Egypt, for instance, has recently announced that it will begin rationing its supplies of subsidized bread, a vital source of nutrition for the most vulnerable people.
Furthermore, China’s consumer price index surged more than economists predicted, growing by 2.9% in May YoY. The country’s economic growth slowed in Q1 2022, and, with its food prices surging, there are fears of inflation which could trigger an economic crisis.
The rising global food prices can be attributed to several factors, including supply chain disruptions caused by the Covid-19 pandemic. Extreme weather conditions such as droughts, wildfires, and flooding have disrupted food supplies, and geopolitical instability coupled with rising global demand has caused the price of several food commodities to rise.
Implications for UK consumers
The recent data from the UK has indicated that while the country is facing high food inflation, it’s not just about the rising cost of food. As consumers compensate for rising food prices, businesses that cater to discretionary spending – furniture, clothing, and restaurants – have been hit the hardest.
Although it may seem gloomy, it’s not all bad news. Projections from experts indicate that inflation is likely to fall off in the second half of the year, with global food prices likely to mitigate gradually due to greater supply stability. However, the UK and other countries will likely face the impacts of the inflation for the foreseeable future.
The prospect of continued food inflation implies that businesses need to adjust and adapt to the changing realities, and consumers should make adjustments to their behavior. Although the process may be painful and uncomfortable, adjustments in food and lifestyle habits could lead to long-term gains in improved health and financial stability. In conclusion, the rising food prices in the UK and around the world are indicative of the complex global economy we live in, requiring careful and thoughtful adjustments to ensure long-term success.
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
High food inflation pushed up spending on groceries in the UK last month, prompting many consumers to cut back on discretionary purchases, according to retail sector data released on Tuesday.
Figures from trade body British Retail Consortium and consultancy services firm KPMG showed UK food sales rose by an annual rate of 9.6% in May, well in above the 12-month average of 6.9%.
The figure was also more than double the overall retail growth rate of 3.9%, the slowest in six months, underscoring how rising food prices are now the main driver of overall growth. inflation.
The pace of overall retail spending in May was dampened by non-food sales, which remained largely flat at 0.7%. The BRC data is not adjusted for the pace of price changes, suggesting consumers bought fewer goods than in May 2022.
Paul Martin, head of UK retail at KPMG, said the grocery sector was “the fastest growing part of the consumer wallet”, which meant consumers “had to spend more. . . in the one area that is becoming disproportionately more expensive”.
Inflation in the UK decreased less than expected between March and April, from 10.1% to 8.7%, according to official data published last month. In April, food prices rose at an annual rate of 19.1%, down slightly from a 45-year high of 19.2% in March.
Martin added that retailers “hope inflation levels in the broader economy continue to move in the right direction to bolster much-needed consumer confidence.”
Separate data from Barclays, which monitors almost half of all credit and debit card transactions in the UK, also showed a rapid increase in supermarket spending, up 9.4% in May. In addition to high food inflation, the bank attributed the increase in grocery spending to the holidays to mark the Coronation Bank Holiday weekend and the Eurovision Song Contest.
Spending on pubs and takeaways also continued to perform well, posting increases of 6.4% and 13%. But spending on restaurants and on furniture and electronics all contracted from a year earlier, with purchases of household goods and clothing down 4.2% and 5.1% respectively from May. 2022.
Overall consumer spending rose just 3.6%, according to Barclays, well below the rate of inflation and down from 4.3% in April. Esme Harwood, director of Barclays, said many consumers “were having to give up discretionary shopping to compensate for rising food prices, with clothing and restaurants being hit the hardest”.
Meanwhile, spending on fuel fell 10.7%, the bank said, reflecting lower energy costs since May last year when gas and petrol prices soared. skyrocketing after Russia’s full-scale invasion of Ukraine.
Silvia Ardagna, head of European economics research at Barclays, said the decline helped the UK avoid a technical recession – defined as two consecutive quarters of economic contraction. But she added that “the forward outlook remains one in which the economy is likely to stagnate.”
https://www.ft.com/content/a12138d5-8b0e-4369-be25-4e6eebc48107
—————————————————-