Foodservice price inflation fell slightly year-on-year to 20.6% in February, down from its record high of 22.9% – clear evidence that price increases are beginning to slow, according to the latest CGA Prestige Foodservice Price Index.

The full basket of food measured by the Index increased by only 0.7% month-on-month – one third of the average rate recorded towards the end of 2022.

The latest report notes that this pattern, combined with prior year base effects, should continue to push down inflation during the remainder of 2023, with prices rising at a slower rate than in 2022.

However, all categories within the Index are still seeing double-digit inflation, with oils & fats the highest of 37% year-on-year and sugars, jams and syrups the lowest, and 12%.

“In spite of falling inflation we expect the pressure on margins for operators to increase during 2023,” Prestige Purchasing CEO Shaun Allen said.

“Although the rate of increase will slow, supplier food prices will continue to increase during the year – at a time when consumer demand will be tightening and scope for increased menu pricing will be limited.”

Major upstream influencers on the price of food, including oil prices, exchange rates and commodity markets, are now stable when compared to 2022. While the UN FAO Food Price Index average 129.8 points in February 2023 – down 0.6% from January, continuing the downward trend seen over the previous 10 months.

Lower consumer demand in the sector is now beginning to impact sales volumes, which should also help to ease prices. However, energy and labour costs remain a significant challenge, so the rate of inflation decline may be slow for some time, said the report.

James Ashurst, client director at CGA by NIQ, added: “News of an easing in foodservice price inflation is very welcome after months of historically high numbers. Key indicators point to further respite as the year goes on, but commodity markets and oil prices remain vulnerable to various macro and micro pressures, so there is no room for complacency.

“With pressure on consumers’ spending continuing, trading conditions will remain very challenging for businesses across the sector.”