·Finance Reporter, Yahoo Finance UK
Fri, 19 May 2023 at 12:01 am BST
Food prices are on an upward spiral and will soon become the biggest cost of living hit to family finances as energy bills fall back.
This summer the pressure from rising food bills since 2019-20 (averaging £1,000 per household) will be larger than that for energy (averaging around £900), according to the Resolution Foundation.
Food price inflation reached a record high of 19.1% in March 2023 – its highest level in half a century – and food prices look likely to continue rising for some time to come, putting it on track to contribute more to overall inflation than energy in the months ahead, according to the think tank.
Rising food prices pose a greater challenge to lower-income households, who spend a higher proportion of their income on food: 15%, compared 10% for the highest-income. As a result, the effective inflation rate for the poorest tenth of households was almost 50% higher compared to the richest tenth of households in March.
Poorer households, who are more likely to already be purchasing the cheapest products, are also less able to respond to rising food prices by changing what they purchase.
Instead, the risk is they simply eat less, with almost two out three (61%) of the poorest fifth of households reporting cutting back on food and other essentials, compared to about one third (35%) for the richest fifth.
Around one-in-five people also reported eating less or skipping meals, with this most common among those on the lowest incomes (27%), receiving benefits (43%), from certain ethnic minorities (30%for black respondents), or with larger families (37%).
Lalitha Try, economist at the Resolution Foundation, said: “Everyone realises food prices are rising, but it’s less clear that the scale of the increases has been understood in Westminster.
“This summer the food price shock to family finances is set to overtake that from energy bills. What remains consistent is that those on low-to-middle incomes are worst affected.
“The cost of living crisis isn’t ending, it’s just entering a new phase.”