Food inflation up sharply in 2008

UK consumers are becoming more selective about how they shop

Food prices rose sharply in 2008, after years of food price deflation, research from Verdict shows.

For the twelve months to the end of December food price inflation hit 11.9%, while the monthly increase from November reached 1.4%.

"But the good news for consumers is that the pace of food inflation is easing," said Verdict.

The survey comes as data on Tuesday is expected to show inflation eased considerably in December.

According to a Reuters poll, the annual inflation rate is tipped to fall to 2.7% in December from 4.1% in November.

Customer reaction

Verdict's consulting director Neil Saunders said: "Consumers have felt the pinch of rising food prices and have reacted by shopping around more, using discount supermarkets and buying less."

According to Verdict, individuals have become more price sensitive and and "increasingly willing to sacrifice convenience for low prices."

In 2007, shoppers visited on average 1.9 stores as well as their main store while in 2008 people visited on average 2.4 additional grocery retailers.

Notably, laundry, washing and paper products were up 21.6% for the year, meat and fish added 17.7% and fresh fruit and vegetables climbed 16.8%.

Other concerns

While inflation was a major concern for the first half of 2008, there are now worries about deflation as the economy slows and consumers cut their spending.

Though the Consumer Prices Index (CPI) is tipped to remain above the UK's target inflation of 2%, it is set to be far from September's high of 5.2%.

Meanwhile the Retail Prices Index (RPI) - which includes mortgage payments - is expected to drop to a yearly rate of just 0.8% in December from 3% in November.

The Bank of England reduced interest rates to 1.5% this month, representing the lowest level in its 315-year history, in its attempt to boost the economy.

But many economists predict that the slowdown will continue for some time, with credit remaining hard to access, manufacturing slowing and jobless numbers increasing.