Food price inflation drops to 1.3% in July as retailers lean on discounting

The Office for National Statistics reported that food price inflation fell to 1.3 per cent in July, the lowest level since September 2021 and down from 1.7 per cent in June. Sixteen food categories recorded lower prices, with the biggest falls seen in pizza, butter and jams or marmalades.

Supermarket chains represented by the British Retail Consortium say that extensive discounting of everyday essentials has been a purposeful response to inflationary pressures and has helped keep food affordable for households. The BRC’s lead economist noted that discounting protects consumers from broader economic forces and that maintaining stable food prices should be a priority for the administration led by Andy Burnham.

Retailers, however, caution that the recent easing of price pressure may be temporary. They argue that thin profit margins and rising operating costs mean that without supportive fiscal policies the downward trend could be undone. Their lobbying focuses on lower business rates, reduced energy standing charges and eased employment costs, which they say would allow further savings to be passed on to shoppers.

Lord Wolfson, chief executive of Next, warned that stricter rules on zero‑hours contracts could limit the ability to give staff more hours, which could indirectly affect price stability.

Manufacturers have also taken steps to curb costs. The chief economist of the Food and Drink Federation explained that after the Ukraine‑related energy shock firms renegotiated contracts and diversified supply chains, helping to keep prices low. She added that severe droughts across Europe this summer could pose new challenges for producers and later affect retail prices.

Despite the overall decline, some categories saw price increases. Fish prices rose by 13.6 per cent, bottled water by 9.9 per cent and preserved fruit by 8.1 per cent in July. The Food and Drink Federation had previously warned that the war in Iran could push food inflation toward 10 per cent, underscoring the volatility of global factors.

Supermarkets expect to continue discounting while they press the government for relief on business rates and energy costs. If such measures are introduced, retailers say the savings could be passed on to shoppers, sustaining the downward trajectory in food inflation. Conversely, if pressures persist, profit margins may tighten and food price growth could accelerate, especially if drought‑related supply constraints worsen.