Food and drink makers cut prices for first time in three years
By David Wood | 18th July 2023
UK food and drink manufacturers cut prices for the first time in more than three years in June, passing lower production costs down the supply chain.
The 'factory gate' prices paid by the likes of wholesalers and retailers fell from the previous month for the first time since February 2020, according to the Lloyds Bank UK Sector Tracker.
Britain's food and drink manufacturing sector posted a reading of 49.4 on the tracker's measure of output charges last month, down from 60 in May, where a reading below 50 indicates price reductions, reported the This Is Money website..
Food manufacturers were one of the few sectors to lower their selling prices due to improvements in the supply chain last month
The fall in factory gate prices came as food and drink producers enjoyed a second consecutive month of lower input costs, while a further drop in global food commodity prices has also helped.
The Food and Agriculture Organization's (FAO) price index, which tracks the most traded food commodities around the world such as cereals, dairy and vegetable oils, fell further to 122.3 points in June, having hit its lowest level in two years in May.
Food prices have been rising sharply in the past two years, with some household favourites having almost tripled in price.
The fall in factory gate prices offers some optimism about the rising cost of living, but demand could keep inflation 'sticky', according to Lloyds Bank.
Manufacturers of food and drink reported falls in input costs and were one of the few sectors to also lower their selling prices due to improvements in the supply chain.
Chemicals manufacturers and automobile and auto parts producers also cut their prices in June. Overall, six sectors saw a decrease in input costs.
However, the number of businesses that mentioned raising prices due to strong demand increased in June.
This was particularly the case across the services sector, where the number of firms reporting raising prices due to strong demand was more than 4.5 times relative to the long-run average.
Nikesh Sawjani, senior UK economist at Lloyds Bank, said: "June's data shows that more and more sectors are seeing moderations in cost pressures, which could - if sustained - carry through to falls in prices charged to customers.
'However, any benefit this has in terms of future inflation trends could be cancelled out by what is clearly still strong demand in some areas of the economy, which could lead to inflation being "stickier" than hoped."
Copyright 2023 Moose Partnership Ltd. All rights reserved. Reproduction of any content is strictly forbidden without prior permission.