August 14, 2008

Meat Prices Drive Up Food Inflation

By Matt Dickinson; Peter Woodman

More expensive bacon and sausages powered food inflation to 13.7 per cent in July - its highest reading since records began.

Meat costs including bacon, ham and poultry products soared 16.3 per cent year-on-year in July, data from the Office for National Statistics showed.

Dearer food as a whole weighed in with nearly half the 0.6 per cent in the overall rise in the Consumer Prices Index last month, taking what is the official rate of inflation up to a new high of 4.4 per cent.

The ONS said retail prices for back bacon rose 13 per cent to pounds 8.48 per kg while best mince soared 19 per cent to pounds 5.77. Pork sausages were nine per cent per cent dearer per kilo at pounds 3.92, while fresh chicken jumped 35 per cent to pounds 3.02. There were also big increases for bread and cereals, up 15.9 per cent, milk, cheese and eggs, which rose a massive 19 per cent and vegetables, which shot up 11.1 per cent over the past year.

Rampant food inflation is likely to remain for the rest of the year as recent higher oil prices trickle down to farmers and producers, an economist said. National Farmers' Union economist Richard George said the rises have been driven by higher oil or oil- linked products such as feed, fertiliser and fuel for farmers and producers.

This is despite oil prices easing about 25 per cent since last month's EUR147 a barrel high.

"Farmers are seeing a relentless pressure on key items which are either fuel or linked to fuel," Mr George said. "That remains the biggest issue and it takes time for these factors to make their way through the system.

"We are still half-way through that process, and that's why we see this trend in inflation continuing for the rest of the year."

Another survey earlier this month showed fresh food inflation soared into double figures last month as oil and commodity costs filtered down to producers, a survey showed today.

The British Retail Consortium-Nielsen Shop Prices Index (SPI) revealed that fresh foods were 10.8 per cent dearer in July compared to a year ago. The figure rose from 8.4 per cent in June, and has more than trebled over the past 12 months.

Annual inflation for all food was 9.5 per cent last month, the survey showed, while ambient foods - including tinned and other longer-lasting items - showed a 7.4 per cent rise.

Meanwhile, it was revealed that fuel-price driven cutbacks by airlines have led to the number of flights through UK airspace decreasing for the first time since the post-September 11, 2001, downturn.

Air traffic control company Nats handled 231,537 flights in July 2008 - a 0.6 per cent dip on the July 2007 total.

The downturn in flight numbers after the 9/11 attacks on the US lasted for about a year.

But since September 2002 the Nats' monthly figures have shown an increase on the same month the previous year.

Last month, transatlantic departures and arrivals decreased by 3.3 per cent. And while transatlantic services flying non-stop over the UK increased by 2.3 per cent, it was far less than the 11.1 per cent increase in June 2008 compared with June 2007.

But controllers at Heathrow and Gatwick airports broke their monthly records by handling 41,941 and 26,077 respectively. Controllers at Nats' London, Scottish and Oceanic control centres also broke records.

Nats operations director Ian Hall said: "The aviation industry has always been a barometer of the wider economy so it should not come as any surprise to see a slight slowdown, particularly since the airlines have signalled some cutbacks to services.

"This is the peak summer month and it is important to note that we are still handling record numbers of flights in key parts of our operation."

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