Food Inflation

According to the graph in figure 1.0, it suggests that food inflation for the UK grew rapidly fast reaching 13% in August 2008 compared to 5.5% in the beginning of the year which was lower than other Euro area and the European Union. Furthermore, food inflation (including bread) in the UK decreased steadily in the following months to 10.1% by October 2008, however even though it was decreasing the graph does not show any downward trend compared to the other European countries. This case got worse, as by of beginning of 2009 rate of food inflation in the UK was competitively at its highest in the European areas.

The input prices of grown food in the UK had rapidly increased, reaching its peak in mid-2008, due to the increasing of cost in energy which led to an increase of 160% in fertiliser, in addition in another case where cost of energy were to decrease it would also mean that the price of home grown food will decrease. According to the Retail Price Index (RPI) rate of food (Bread), the inflation in beginning of 2008 increased in a high rate having a massive margin between all items inflation and rate of food inflation.Furthermore by mid-2008 the RPI inflation rate for food again was at its peak at 12.8% annually contrasting to a 4.7% of all other items inflation rate. Following this year in 2009 the RPI for food (bread) fell by only a small margin at an annual rate of 11.3%.

Figure 1.1, is also an evident that the RPI for bread in the UK had begun to climb which by mid of 2008 it was at its peak.