Families should brace themselves for an increase in food prices as the value of the pound continues to fall, according to Northern Ireland’s leading retail expert.
Donald McFetridge’s comments mirror the findings of a new report, which has revealed that a basket of 12 everyday items is now dearer than last month.
The bad news — which comes at a time when sterling has slid significantly against world currencies — seems to suggest that food price inflation will continue to rise in 2009.
And it means that householders across the province must continue to tighten their belts as the economic downturn leaves more misery in its wake.
Speaking to the Belfast Telegraph yesterday, Mr McFetridge said that a bleak winter was likely to be on the cards.
“At present, the weak pound is continuing to present problems on the world's food markets for consumers in Northern Ireland and right throughout Great Britain,” he said.
“The currency fluctuation means that food prices will definitely continue to rise in this geographic region leaving consumers with no option but to tighten their belts, watch their wallets and carefully consider the use of their credit cards.
“In spite of the recent VAT reduction, and in spite of the anticipated further interest rate cut this month, consumers will experience further price increases in the first part of 2009 and well beyond.”
In a study, the Grocer magazine compared the UK’s four major supermarkets — Tesco, Asda, Sainsbury’s and Morrisons (although the latter does not trade in Northern Ireland) — and found the price of rice, meat, coffee and orange juice have risen sharply.
So, although prices fell for the first time in a year in September, sharp falls in the pound over the last few months appear to have minimised or reversed the effect of a drop in global food costs, pushing prices higher again on supermarket shelves.
The currency |fluctuation means that food prices will definitely |continue to rise in this geographic region leaving |consumers with no option but to |further tighten their belts
The Grocer said the global economic crisis has led to a significant decrease in the price of many basic foods.
However, since January the pound has fallen 25% against the dollar and 17% against the euro — with industry analysts predicting further falls if the UK cuts interest rates by more than other countries.
The report claims the drop in the value of the pound not only hikes up the cost of imported food — half of all food in the UK — but also increases the price of key agricultural commodities, priced in dollars.
Among the items which have seen a considerable price increase is coffee, according to the Grocer, where the year-on-year price tag has risen 23.9%, despite being cheaper in dollar terms.
Similarly, bananas are 25.2% more expensive than last year — and went up 8% in the last week alone — while orange juice has shot up in price since October (despite remaining 8.9% cheaper than last year).
Other commodities are still significantly more expensive with the pound pushing prices up, including cocoa (up 47.7%), rice (41.1%), beef (30.5%) and chicken (18.4%).
Unfortunately for Ulster’s beleaguered consumers, Mr McFet-ridge, head of retail studies at the University of Ulster, predicted an upwards trend in prices.
“Some economists are forecasting that this is not going to be a short recession; in fact, many anticipate it will be long, protracted and deeper than many in the industry realise,” he said.
“For this reason, consumers will experience further steep price increases in the food sector, leaving them with less disposable income to spend in other sectors. This does not augur well for 2009 and I can comfortably predict that things will get much worse before we see any perceptible signs of improvement.
“This is not good news for consumers and I fear that there will be more to follow.
“Between now and the New Year there will be further job losses and store closures in the retail sector; it's an extremely tough time for retailers and consumers alike.
“Unfortunately, there will be further casualties on the High Street and the large/big four |supermarket groups (while unlikely to go to the wall) will continue to experience testing times in the retail marketplace, while the German deep discounters continue to see their turnover and customer growth patterns improve radically.”
He added: “This will indeed herald what can only be described as a ‘bleak mid-winter' in extreme.”
Martin Deboo, an analyst with Investec, said the first six months of 2009 is looking tough for food suppliers.
He predicted world commodities will be 30% cheaper in 2009 compared to 2008, but due to the fall in sterling, the UK would only see half of this benefit.
“While the retailers are getting aggressive, many food companies have bought stock ahead for several months, which means it will be months until they see any falls in cost prices,” he said.