UK inflation surges to nine-year high of 3.2% in August as food and fuel prices jump

UK restaurant dining drinking bar
Prices for eating and drinking out rose in August as inflation hit 3.2%.

  • UK inflation rose to reach its fastest pace in nine years in August, hitting 3.2% year-on-year.
  • The Office for National Statistics said gains in food, restaurant and transport prices were key factors.
  • Economies around the world are dealing with strong inflation, putting pressure on central banks.
  • See more stories on Insider’s business page.

UK inflation hit a nine-year high in August as the economy reopened, with food and fuel prices climbing sharply, the country’s Office for National Statistics said Wednesday.

Year-on-year consumer price index inflation came in at 3.2% in August, the fastest rate since March 2012, after slowing to 2% in July. Economists had been expecting a rise to 2.9%, according to Bloomberg data.

Month-on-month, CPI inflation came in at 0.7% in August after flatlining in July, the ONS said. Economists had been expecting a rate of 0.5%.

The ONS said gains in prices of food, restaurants and hotels, and transport contributed to the jump. It said rising fuel prices were the main factor pushing up transport costs.

However, it urged caution in reading too much into August’s numbers. The statistics body said a factor pushing up year-on-year inflation was the fact that food prices fell sharply in August 2020, the comparative month, as a result of the government’s “eat out to help out” meal subsidy scheme.

The pound climbed after the data was released and stood 0.15% higher at $1.383 in European trading. The FTSE 100 stock index was roughly flat.

Read more: Real estate will play a vital role for investors as inflation heats up, according to the world’s largest asset manager. Here are 8 things BlackRock says investors should focus on as they fill out their real-asset portfolios.

Inflation has surged in the UK and other advanced economies in recent months as growth has bounced back after the lifting of coronavirus restrictions.

The Bank of England has predicted that inflation will rise as high as 4% before the end of the year. But, along with the US and Eurozone’s central banks, it thinks the price rises will prove transitory and expects inflation to fall back to its 2% target by 2023.

Yet Paul Dales, chief UK economist at Capital Economics, said August’s figure may well be the first step to inflation shooting up to 4.5%. He said higher energy prices are likely to push up the figure further than the Bank of England thinks.

But he added: “Inflation will fall sharply next year as a lot of these upward influences unwind. By the end of 2022, it may be below 2.0% again.”

Dales said the next few months will be an “uncomfortable period” for the BOE but said it is unlikely to raise interest rates from their current record-low level of 0.1% until 2023.

The UK data came a day after figures showed that US CPI inflation cooled to 5.3% in August from a 13-year high of 5.4% in July. Month-on-month, US inflation slowed to 0.3% from 0.5% a month earlier.

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California restaurant owners fear bacon may become scarce – or even disappear – as new animal-welfare rules takes affect, reports say

A closeup of four strips of bacon cooking in their own grease
Animal welfare campaigners have been pushing for change for years.

  • New California animal-welfare rules could make bacon harder to find, AP reported.
  • The rules were approved by voters in 2018 but are raising fears now due to their potential impact.
  • They require more space for breeding pigs and veal calves and will take effect next January.
  • See more stories on Insider’s business page.

A change in animal-welfare rules could make bacon difficult to find and more expensive to buy, reports say.

At the beginning of next year, California will enforce the welfare proposition, which was approved by voters in 2018. The Farm Animal Confinement Proposition requires more space for breeding pigs, egg-laying chickens, and veal calves.

The idea is that all of those animals should have sufficient space to stretch out their wings, claws, and paws, as Insider’s Hilary Brueck reported. Welfare campaigners have been pushing for the change for years.

Back in 2018, Kitty Block, president and CEO of the Humane Society of the United States, said in a statement: “California voters have sent a loud and clear message that they reject cruel cage confinement in the meat and egg industries.”

Between now and January, courts or the state could try and intervene. But if they don’t, California is expected to lose almost all of its pork supply and pork producers will likely face higher costs to regain the market, according to AP.

Once the amount of time needed to build new facilities and inseminate sows is factored in, it is unlikely the pork industry will be able to supply California, AP reports.

“We are very concerned about the potential supply impacts and therefore cost increases,” said Matt Sutton, the public policy director for the California Restaurant Association, told AP.

Jeannie Kim, a San Francisco restaurant owner, also told AP: “Our number one seller is bacon, eggs and hash browns. It could be devastating for us,” she said.

The outlet reported that California restaurants and grocery stores use about 255 million pounds of pork per month, but its farms only produce only 45 million pounds.

To fill the gap, The National Pork Producers Council asked the US Department of Agriculture for federal support to help pay for rebuilding pig facilities. But they haven’t complied because California hasn’t yet issued formal regulations on how the new standards will be enforced, according to AP.

As Insider’s Anna Cooban reported, bacon costs are already rising – it now costs 13% more than last year, which is apparently due to supply shortages and rising costs of pig feed. The cost of bacon rose 1.8% between April and May, according to BLS data, although this was a slower increase than March to April, when bacon prices jumped 3.4%.

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Food prices are on the rise. From ice cream to tequila, beer, and coffee here are some of the latest products to receive a price bump

reading food labels grocery shopping couple husband wife
  • Food prices are on the rise again, as major companies struggle to combat surging transportation costs.
  • Nestle and Unilever have hiked prices across several popular brands to maintain profit margins.
  • The rise in commodity costs is showing no signs of easing in the coming months.
  • See more stories on Insider’s business page.

Top food and beverage companies are set to hike prices even higher after already initiating an increase in product costs earlier this year.

US inflation is rising at its fastest pace in over a decade as skyrocketing transportation costs meet a surge in consumer demand.

Nestle CEO Mark Schneider said on Thursday that the company plans to raise prices going into the second half of 2021 by about 2% overall. Earlier this year, the company had hiked its prices globally by an average of about 1.3%, but it has not been enough to compensate for runaway shipping costs and the wage hikes that have been implemented to offset a national labor shortage, the CEO said.

summer ice cream time

In particular, the company said the cost of dairy-based products like ice cream have continued to rise, alongside the costs of producing bottled water.

Coffee prices are also at a six-year high due to a cold snap in Brazil — one of the commodity’s top producers. Both ingredients are putting increased pressure on the company responsible for brands like Edy’s, Häagen-Dazs, and Nescafe.

Other major companies, including Unilever, Procter & Gamble, and General Mills have warned investors over the past few weeks that rising commodity costs could force their prices higher, especially as demand for products has boomed alongside an increase in US vaccination rates and the return to more normal work and travel patterns. The three major companies had already raised prices by up to 3% across several brands in May.

Last week, Unilever announced it was raising prices for multiple brands, including Ben & Jerry’s, in response to soybean oil prices that are 80% higher than this time last year.

baileys in coffee

Popular alcohol company Diageo also said on Thursday it is raising its prices on several of its products, including Bailey’s and Casamigos tequila. The company has seen a boost in alcohol sales since the US vaccination rate has increased, but the spike in demand has not been able to compensate for the even greater rise in the cost of imported goods like alcohol.

Similarly, beer prices may also be on the rise. Anheuser-Busch, the company known for its Budweiser brand said on Thursday it is looking into the possibility of selling its products at an elevated price.

Danone, the company known for its Activia yogurt and Evian water, told investors on the same day that it plans to raise prices across all of its products to maintain profit margins.

Yoghurt by French foods group Danone is seen in this photo illustration shot in Strasbourg, April 15, 2015.  REUTERS/Vincent Kessler
Yoghurt by French foods group Danone is seen in this photo illustration shot in Strasbourg

While many of the companies are looking to raise prices for the second time this year, experts say prices increases will likely not stope there and will continue to rise even further in the coming months as shipping delays show no signs of easing, and poor weather conditions across the globe threaten food supplies.

From the cold snap in Brazil to floods in China and Europe, as well as scorching temperatures in North America, experts told Bloomberg climate change and the weather volatility that comes with it could cripple the food industry.

Insider reached out to all of the companies mentioned in the article about the prices increases but did not receive a comment in time for publication.

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A Maine restaurant is cutting opening hours because it can’t get enough ingredients to serve diners. It says it’s ordering 8-ounce burgers and receiving 2-ounce patties.

restaurant server plates
Restaurants across the US have been raising their menu prices because of supply chain issues.

  • Brady’s Restaurant in Boothbay Harbor, Maine, cut opening hours because it can’t get enough food.
  • Its owner said that suppliers are hiking prices and substituting some orders.
  • “You order an 8-ounce patty, they’ll send you a 2,” she said.
  • See more stories on Insider’s business page.

The owner of Brady’s Restaurant in Boothbay Harbor, Maine, says supply shortages have forced it to cut its opening hours.

“Our food supply chains have gotten real sketchy,” owner Jennie Mitchell told Insider.

The restaurant now closes an hour early every day, and closes completely for an extra day each week, too, The Boothbay Register first reported.

Mitchell said that the US labor shortage hadn’t directly hit the restaurant – most of its staff had been there for years – but that it had disrupted supply chains, causing a “ripple effect.”

Read more: These 9 food tech startups are capitalizing on the labor crunch with tools that help franchisees hire or automate the restaurant workforce

Mitchell said that she hadn’t been able to get pineapple juice for around three weeks earlier in the summer, and that some of her orders, such as salad dressing, were still being substituted for other items that were lower quality or different size to what she had ordered.

“Meats, they’re doing stuff like you order an 8-ounce patty, they’ll send you a 2, just to get you product in the door,” she said.

As well as shortages and substitutions, Mitchell said that food prices had gone up across the board, and that beef in particular had “gone through the roof.” In June, beef and veal cost 13.2% more than in February 2020, according to data from the Bureau of Labor Statistics (BLS).

“In the food industry it’s just about everything,” Mitchell said, discussing rising prices. “It rotates, you never know what it’s gonna be.”

As a result, restaurants across the US have been raising their menu prices. The owner of Manville Pizza in Manville, New Jersey, told Insider that he’d had to raise menu prices for chicken wings by more than 50%.

“Ultimately it’s got to go on to the consumer,” Mitchell said.

The supply chain disruption comes as tourists are returning in droves.

“We haven’t seen crowds like this in Boothbay Harbor since 1976” during the bicentennial, Mitchell said. “You can’t get a hotel room in this town.”

Brady's Restaurant in Maine is full with diners
Mitchell said Boothbay Harbor hadn’t been so busy since the bicentennial.

“It’s a good problem to have,” she said, but explained that she had had to adjust Brady’s opening hours to ensure food supply could stretch to meet growing demand.

“I’d rather make people a little upset on the front end” and not seat customers, rather than find out after the diners have ordered that they don’t have enough food, she said.

Brady’s is one of the lucky ones. Three other restaurants in Boothbay Harbor had closed “directly a result of having no staff,” Mitchell said.

A third of former hospitality workers said in a Joblist poll that they wouldn’t return to the industry. Alongside rising food costs, the labor shortage is causing some restaurants to cut opening hours and increase menu prices.

Got a story about how your business is responding to the labor and ingredients shortages? Email this report at gdean@insider.com.

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Truckers are getting six-figure salaries as food suppliers scramble to find drivers – and it’s pushing up the price of fryer oil and chocolate by as much as 50%

truck driver
A contract port truck driver, Giraldo has seen work dry up as imports slow during the coronavirus outbreak. He gets fewer than four hauls a week, compared with at least 12 in normal times.

  • Food suppliers are hiking up trucker wages and food prices as they struggle to find drivers, per the NY Post.
  • One New York company said it had to hire truckers from Alabama and put them up in hotels in the Bronx.
  • Chefs’ Warehouse told The Post that this was pushing up prices for oil, salt, and chocolate.
  • See more stories on Insider’s business page.

Food suppliers desperately trying to find drivers to transport their goods are hiking up wages for truckers to as much as six figures – and some have to raise their food prices as a result, according to a report by The New York Post.

The head of an outsourcing company that hires truckers, called Regional Supplemental Services (RSS), said he gets “calls from desperate Fortune 500 companies every day that need to move perishable food.”

One company told the Post that as well as boosting trucker salaries, it had raised the price of meat by 20% and chocolate by 30% to cope with its slim margins.

Bronx-based food supplier Chefs’ Warehouse told the publication that over the past few months it had been hiring some truckers from Alabama and paying for them to stay at hotels in the Bronx because it couldn’t find any drivers in the area, despite offering wages of at least $20 an hour.

“Never in our wildest dreams did we imagine we’d be doing this – putting people up in hotels to work for us,” the company’s CEO Christopher Pappas told The Post.

Read more: How Starbucks is defying the labor shortage crisis with transformative perks, not cash teasers like McDonald’s

Pappas said that the Chefs’ Warehouse, which supplies food for businesses including restaurants and hotels, had lost 40% of its drivers and warehouse workers during the pandemic. To plug the gap, the company hired truckers through outsourcing company RSS.

Other companies have been turning to RSS during the labor shortage, too, and it now expects its revenues to rise sevenfold in 2021.

“I get calls from desperate Fortune 500 companies every day that need to move perishable food,” Rich Jennings, RSS’ vice president, told The Post. “It’s most dire in the food industry right now.”

Wages are rising, and many drivers are moving among trucking companies for better salaries, Insider previously reported.

“I’ve never seen drivers get paid what they are paid today,” Jennings added. “They are getting well into the six figures and they can easily make $3,000 a week.”

A commercial driver’s license is “like a golden ticket right now,” he added.

Prices are rising because of the driver shortage

Moody’s analyst Mark Zandi told The Post that average producer prices for truck transportation were up 10% in April year-over-year – the strongest growth in a decade. Zandi said that this had big impacts on food products because transportation makes up a larger portion of their costs.

Pappas told The Post that Chefs’ Warehouse’s prices across its 55,000 products rose 7% on average in the first quarter of 2021. In a normal year, this would be between 2% and 3%, he said – and anything above this is “earth-shattering” because margins in the business are so low, Pappas said.

Chefs’ Warehouse’s biggest price hikes included a 54% increase for 35-pound tubs of canola and soybean fry oil, 30% for cases of kosher salt, chocolate, and olive oil, and 20% for meat.

A lack of truckers isn’t the only thing pushing up food prices for consumers. The current shipping crisis, as well as falling food production and a shortage of farm, retail, and hospitality workers, is causing retailers and restaurants to hike up the prices of foods like chicken wings and burritos.

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Your next meal is getting more expensive. Here’s what’s driving the surge in food prices.

grocery store checkout conveyer belt supermarket cashier grocery shopping
  • Foods is getting more expensive at grocery stores and restaurants.
  • Some companies are raising prices, while others are selling smaller quantities for the same price.
  • Supply-chain shortages and poor weather are helping drive higher commodity costs.
  • See more stories on Insider’s business page.

Food prices are surging in grocery stores as well as on restaurant menus.

Last week, Chipotle hiked prices for menu items by about 4%, as the cost of labor and ingredients continues to rise amidst a spike in demand. Red Robin and Cracker Barrel have also increased prices by about 3%, The Wall Street Journal reported. The chains may be forced to further hike prices if commodity costs continue to inflate.

In May, US consumer prices hit their highest level in 13 years, jumping 5% from the previous year, as the cost of meat products and baked goods led the surge in food prices, according to the US Department of Labor.

“We’re in a period of unprecedented commodity inflation,” Unilever CEO Alan Jope told investors on Monday.

As a result of increased product costs, some companies including Unilever have begun selling products at the same cost, but in smaller quantities.

Even companies that cater to more frugal budgets have been forced to hike prices. Dollar Tree CEO Michael Witynski said in May that the company has struggled to keep prices low.

Why are food prices surging?

Food prices are rising in tandem with a broader inflation trend in the US. While vehicle and fuel costs have led the surge in consumer prices, food prices have also risen as increased demand meets supply-chain snags. Key commodities have become increasingly difficult to obtain due to shipping delays, the national labor shortage, and severe droughts in key countries.

A global shipping-container shortage – which has about 5.5% of all freighters waiting weeks outside of ports to unload, including several key ports in southern California – has made it difficult to transport goods. The delays have put transportation costs at a premium, as companies compete for limited space on container ships and delivery trucks. Overseas transportation costs between Asia and the US have surged about 250% higher from this time last year, according to online freight marketplace Freightos.

Home Depot has even begun chartering its own container ships in an attempt to side-step rising coats and bring its products into the US faster.

shipping containers
A container cargo ship in Rotterdam Harbour on April 4, 2021 in the Netherlands. Rotterdam is the largest shipping port outside of Asia.

The US labor shortage is also hampering production and transportation, from a truck-driver shortage to restaurants and grocery stores scrambling to find workers. Many companies, including Chipotle and McDonalds, have hiked worker pay, while other companies have provided additional incentives to lure employees back to work. One Jersey Mike’s in California is offering up to $10,000 in hiring bonuses.

Major droughts in countries like Brazil and Argentina are also driving up prices for corn, coffee, and soybeans. Last month, Reuters reported Brazil was facing its worst drought in 91 years. A “megadrought” in California – the state responsible for over 25% of the nation’s food supply – is also expected to have some impact on food prices in the coming months.

Meat prices surged last week due to a ransomware attack on JBS, a supplier that processes about 20-25% of the nation’s beef, chicken, and pork products.

Consumer prices are at a 13-year-high, but they’re showing no signs of flagging. Executives from General Mills and Campbell Soup Company have warned they may be forced to raise prices further if supply-chain issues continue.

A Campbell spokesperson told Insider the entire food industry was experiencing inflation. “Campbell has a variety of tools to offset the inflationary environment, including pricing actions across most of our portfolio to reflect the broad-based increases in input costs.”

As companies continue to hike prices, experts say prices will only even out when the shipping crisis abates, but no one knows how long the upheaval will last.

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