Consumer confidence down as food inflation rises

The latest Consumer Price Index (CPI) figures, combined with data from the British Retail Consortium (BRC), show food costs are up, while the confidence of shoppers is low.

Headline inflation is currently 3%, while food inflation has risen 1.3% to 3.3% - the highest point in almost a year – a significant jump as retailers anticipate significant additional costs in 2025, from changes to Employers’ National Insurance, to increases to the National Living Wage.

Kris Hamer, director of insight at the BRC, said the figures are a sign of what’s to come. “Prices are expected to rise across the board over the course of the year. 

“If the Government wishes to keep inflation under control, which would ease the burden on consumers, it should mitigate the huge cumulative costs facing the retail industry. Speeding up business rates reform or delaying new packaging taxes would help ease the pressure on prices for the rest of 2025.”

Key data from the CPI reveals that:

- Food and non-alcoholic drink inflation is at its highest annual rate since March 2024.

- Out of 48 categories reported in January by the Office for National Statistics (ONS), inflation was below 5% for 38 categories and above 5% for 10.

- The highest rises are for edible offal (20.2%), butter (18.3%) and olive oil (16.6%).

- Prices fell fastest for pasta, couscous, jams and marmalades.

- Global cocoa production has been in decline for three years - down 13% in 2024, with the industry facing the worst shortage in supply in 60 years, pushing up prices to three times that of 2022 in 2024.

The Food and Drink Federation’s (FDF) director of industry growth and sustainability, Balwinder Dhoot, said rising energy and water bills should be factored into the latest inflation figures too, and added, “Unfortunately, this month isn’t likely to be a flash in the pan for rising food and drink prices. We’re yet to see the full impact of increasing labour costs ... and we expect to see this filter through to shoppers over the coming year.

“We urge the Government to work with industry to simplify regulation and bring business costs down to help protect consumers from rising prices.”

In addition to worrying inflation news, the BRC’s latest Opinium data, capturing consumer expectations for the next three months, has shown February is the fifth consecutive month in which they have worsened.

People’s view of the economy, the organisation said, have reached a new low, having fallen almost 40 points since July last year. “Even Gen Z, the most upbeat generation on the economy and their own finances, saw a drop off in optimism,” said chief executive, Helen Dickinson.

“There was also a widening gender divide in confidence this month, with women more pessimistic than men about both the economy and their own finances, by 13 and 17 points respectively. With many businesses warning of the impact that April’s employer NIC increase will have on hiring, and the rising energy price cap pushing up the cost of domestic bills, it is little surprise that many households are worried,” she adds, saying the expectations many have of higher prices in the future are not unfounded, as two-thirds of retailers say they will have to make increases as a result of a predicted £7 billion in additional costs.

“Almost half of retailers also warned of hiring freezes, with entry-level jobs often among the first to go as they seek any cost efficiencies to help them protect customers from the worst of the rising costs,” Helen continued.

As the Government bill on the future of business rates progresses through Parliament, Helen adds that it’s essential no shop ends up paying more in rates as a result of 2025’s reforms. “Otherwise retailers will face a triple whammy of Budget costs, business rates rises, and new packaging and recycling levies, all of which will filter through to consumer prices.”