Foodservice price inflation dropped back to 0.5% in February 2018—the lowest point since the EU referendum.
The CGA Prestige Foodservice Price Index has been running at relatively high levels since June 2016 but halved from 5.1% in December 2017 to 2.5% in January 2018. It has now reduced again to barely above zero—an inflation level not recorded by the Foodservice Price Index data since the month of the referendum, and well below the rate of inflation recorded by the Consumer Price Index which currently stands at 3%.
The index says the downward trend has been driven by the easing of pressure in several key food and drink categories, and by improved confidence around the UK’s transitional arrangements for its departure from the EU. Categories seeing a fall in prices include fish, where inflation tumbled from 9.8% in December to -4.2% in February. Inflation meanwhile fell to -2.5% in the dairy category this month, largely thanks to falling farmgate milk prices.
However, foodservice prices remain high in several key categories including oils and fats, where soybean supply issues contributed to pushing inflation up to 16.5% in February. The Government’s plan to introduce a soft drinks levy in April encouraged prior adjustments in retail prices and drink formulas, helping to drive inflation in the Soft Drinks category up to 6.8%.
The index suggests there are grounds for optimism that inflationary pressures may continue to ease in the coming months. But it also warns that prices remain vulnerable to supply issues, currency fluctuations and wider economic factors, including the potential for a tariff-driven trade war between the US and China.
Shaun Allen, chief executive at Prestige Purchasing, said: “This month’s Foodservice Price Index inflation figure of 0.5% continues the positive downward movement we have seen over the past few months and will give some much needed respite for the Foodservice industry. However, whilst the overall inflationary pressure continues to ease we also recognise that a significant level of volatility remains within the individual food and drink categories. This volatility demonstrates that a number of supply markets remain fragile and vulnerable to sudden movements from events that can result in sharp inflationary and deflationary swings.”
Fiona Speakman, CGA Client Director – Food, said: “Foodservice price inflation of just 0.5% in February 2018 is welcome news after prolonged turbulence. Our Foodservice Price Index gives reasonable cause for optimism that we might now be entering a sustained period of lower inflation, and with Brexit arrangements becoming clearer and the ‘sugar tax’ now established, we can be hopeful that the worst of recent volatility is behind us. But businesses need to remain vigilant to any fresh pressures on prices, and stay right on top of their purchasing and pricing strategies.”
