Costs of essential travel, energy and food have already taken off — starting to cripple the wallets of millions. Just as cash-strapped consumers grapple with how to spend it, experts warn the worst is yet to come: food prices can climb far higher.
Overall consumer prices rose 9.1pc in the year to May, but food alone is hot on its heels at 8.6pc. It soared almost 30pc from 6.7pc the previous month.
Economists point to core inflation – which strips out the volatile food and energy inflation figures – declining to 5.9pc as a sign of receding underlying pressure. But that will be cold comfort to households as grocery bills shoot up.
Relief isn’t coming soon. “Food price inflation will continue to rise over the rest of the year, probably hitting 10pc later this year,” says Thomas Pugh from audit group RSM.
Domestic companies paid 10.3pc more for food materials in May, compared to last year, while imported food costs rose 20.5pc — the most since 2008.
That means food prices will push 20pc higher during the first few months of next year, predicts investment bank Citi, a result of the culminating effects of a global supply crunch.
In theory, these increases should be a boon to British farmers who can charge higher prices. But they too are grappling with accelerating costs across energy, fertilisers, feed and labour.
Minette Batters, head of the National Farmers’ Union (NFU), says production has become a “story of two halves”, with record cost increases majorly offsetting record prices.
Producer input prices – which measure the cost of raw materials for manufacturing, as well as associated costs like electricity – climbed by 22.1pc in the year to May, up from 20.9pc in April, to hit the highest level since records began in 1985.
On Tuesday, growers’ association British Apples and Pears said the farmers it represents had seen their energy costs double or even triple in the past year. Ali Capper, its executive chair, said cost challenges and labour shortages “risk the viability of farms”.
MakeUK, the national body for manufacturers – of which food and drink producers are the largest single group, accounting for nearly a fifth of all value generated – has called for the Government to take “immediate measures” to shelter companies from the “worst impact of escalating costs”.
Meanwhile, output prices – those paid “at the factory gate” by companies such as wholesalers – were up 15.7pc in the year to May. The gap between the two means companies are taking a hit, likely to their profit margins, to avoid ramping up costs for consumers.
Martin McTague, national chair of the Federation of Small Businesses, said companies are “doing all they can” to absorb higher costs.
Not fully passing price increases on might become harder, however, as the economy and demand slows. Surveys already suggest British shoppers are cutting back in response to the cost of living crisis, and many may simply stop buying products with large-scale price increases.
Discounters such as Aldi and Lidl have already pinned a recent rise in sales on shoppers looking for lower prices.
Rather than a boom, the inflation crisis has brought many farmers to breaking point.
“There are specific challenges,” says Batters. “Ours in the UK is primarily around a very savage retail environment and the role of the discounters.”
She says the Government needs to act, even suggesting an intervention to support prices, which would “give farmers the confidence that they will get, at the very least, the cost of production price”.
“You can't keep selling something for well below what it's costing to produce,” Batters says.
Still, the amount consumers are forking out for some foods has shot up. Pasta prices have risen 16.1pc in a year, while flour is up 16.3pc. Pizza and quiches are 12.3pc more expensive, and olive oil 18pc.
Growing food prices are particularly painful for less well-off shoppers, whose grocery shopping typically makes up a larger proportion of their total spending. The Resolution Foundation, a living standards think tank, says this means the poorest households are already experiencing double-digit inflation.
The war in Ukraine is a big factor in these increases as the conflict devastates producers in the country — one of the world’s biggest suppliers of sunflower oil. That has rippled onto global markets, forcing up the prices of alternative cooking oils including olive, rapeseed and palm. The UK exports roughly half its food, making it vulnerable to price fluctuations on global markets.
“We're not price makers, we're price takers in this,” says Anthony Speight, an analyst at the Agriculture and Horticulture Development Board.
The outlook for wheat is hardly better, with many of Ukraine’s shipments stuck due to the Black Sea blockades and Russia’s intentional targeting of farms. Charles Branch, head of soft and agricultural commodities at Britannia Global Markets, said more than 20m tonnes of grain are trapped in Ukraine with no clear way out. Some estimates are even higher.
Thankfully, cooling temperatures in several other key production regions, including parts of Europe and North America, may mean harvests elsewhere are better than feared a few weeks ago.
Yet, worryingly, traders are increasingly looking to Russia, which has begun its own harvest. Even a strong performance there may not make much of a difference, however, with overall supply so reduced.
“Prices are likely to ease in the coming weeks, but we can expect little relief for the consumer with food prices set to remain well above recent historical averages,” says Branch.
For British shoppers, that means no end in sight to food price pain.