Irish farmers and agri-food exporters will join UK consumers in welcoming a further fall in UK inflation this week.

As Figure 1 shows, overall inflation has fallen to 2.3%, the lowest level of increase since July 2021 and a quarter of the 11.1% rate of increase reported by the UK Office for National Statistics (ONS) for October 2022.

Food price inflation has been running ahead of overall inflation and peaked at 17.5% in March last year and while it has also fallen, it was still at 3.7% in April.

It should be highlighted that the costs of goods are still increasing, they just aren’t increasing as fast as they were when inflation was at its peak.

If inflation stays around the present rate or falls slightly further, it means that the cost of goods to consumers will grow at a much slower pace than we have seen in the last couple of years. They are not returning to the lower prices that prevailed up until prices started rising in late 2021.

Effect of price rises

When prices are rising rapidly, as has been the case over the past two and a half years, consumer budgets get squeezed and purchasing decisions change, because there is less money to spend.

Shoppers tend to switch from branded products to own-label alternatives when shopping and items that could be classified as luxury goods or discretionary spend are often cut out of the weekly shop or at least volumes purchased are reduced.

Beef and lamb could be replaced by pork or chicken in the shopping basket, while branded yogurt may be dropped, but liquid milk purchases are likely to be retained.

Kantar data

The most recent Kantar data on consumer shopper behaviour up to 14 April shows that demand for beef and lamb has been relatively robust, with just slightly less volumes purchased by shoppers.

However, while they had slightly less product in their baskets, the still-rising prices meant that shoppers spent more.

In the case of beef, the volume purchased in the 52 weeks to 14 April was down by 1.1%, but the money spent on buying beef was up by 7.7%.

For lamb, with the religious festivals of Easter in the Christian calendar and Eid Al-Adha in the Muslim faith falling earlier this year, both volumes and value of lamb purchases increased.

Supermarket promotions also drove lamb sales, which were up 2.2% in volume year on year and spend increased by 4.7%.

Interest to Irish farmers

UK inflation and the overall health of the UK economy in general are important for Irish farmers and agri-food exporters, because they are our main export market.

It is a reality that more Irish beef is sold in the UK than is in the home market. Therefore, the buying power of UK consumers matters in shaping demand for the produce that originates on Irish farms.

The UK economy may still have its difficulties and is predicted to change its government in the upcoming election, but inflation certainly isn’t a problem on the scale it was a year ago.