The cost of margarine, sugar and pizza is falling at the fastest pace in nearly two years, as supermarket price wars helped drive UK inflation down to 2.6% in June — a figure the new prime minister welcomed, though analysts warn the relief will be short-lived.
Inflation in the year to June dropped from 2.8% in May, the Office for National Statistics (ONS) said, largely because of lower fuel and food prices. Diesel prices fell for the first time since the start of the war in the Middle East, after the US and Iran agreed to halt military operations and allow the key Strait of Hormuz to re-open. Clothing costs also fell due to summer sales, with many retailers offering larger discounts than last year.
“UK inflation fell to 2.6% in June as supermarket price cuts and lower fuel costs eased pressure, but analysts warn of a rebound.”
Food and non-alcoholic beverage inflation fell by 0.2% month-on-month, with sugar, chocolate and confectionery seeing the largest drop. Beef and veal price inflation eased from 9.4% in the year to May to 5.1% in June, while edible offal – including liver, kidneys and tongue – slowed from 9.2% to 3.4%. Pizza and quiches fell by 6.7% in the year to June, and margarine dropped by 1.9%.
The British Retail Consortium (BRC) attributed the lower food inflation to “intense competition between supermarkets”. BRC economist Harvir Dhillon said: “If retailers are to keep prices affordable for consumers in the long run, the Government needs to take practical steps to lower the everyday cost of doing business.” He added: “Andy Burnham has taken immediate action to ease pressure on household budgets; he must now look to do the same for businesses.”
June’s figure will be welcomed by the new prime minister, who has pledged to make the cost of living a priority for his government. New Chancellor John Healey said the lower rate was “news families want to hear” but “there is much more to do”.
Yet analysts warn the fall is temporary. The recent resumption of hostilities between the US and Iran, and a new jump in crude oil prices, mean inflation could spike again in the coming months. Food inflation often lags by up to 13 months due to the supply chain, so any effects from the war in Iran could still be yet to come.
