Shoppers are still paying higher prices than last year and no reprieve is in sight thanks to a seasonal shift to fruit and veg imports. James Ball reports


Food and drink continues to hold out as virtually the only sector of the UK economy not touched by deflation, even after six successive quarters of recession.

Prices did fall slightly month-on-month, according to the latest Grocer Price Index data, with average selling prices in the major multiples 0.2 percentage points lower in October than September.

However, annual inflation held more or less steady at 3.8%, meaning foodstuffs remain on average more expensive than last year.

Despite the apparent falls in headline commodity prices, shoppers are still paying more. Currency is one of the main factors and last week's dramatic 4% drop in the value of the pound against other major currencies could spur further hikes, especially as the UK imports most of its fresh fruit and veg in the winter.

This shift to imports had a telling effect on fruit and veg prices this month they rose a hefty 7.6% despite the feverish supermarket price war on bananas. Insiders blamed supermarket offers on other key produce lines expiring and the end of the UK season on salad and fruit crops. Prices did, though, remain more or less at last year's levels, up just 1.3%.

Growers warned that UK prices would have to increase over the next year if British producers were to survive in the medium term. "There is a concern that prices should be moving up," said English Apples & Pears CEO Adrian Barlow. "Unless that happens, it is likely that new plantings and new orchards are being jeopardised."

In other categories, supermarket tactics are having significant effects on average selling prices. Frozen food is one of only four categories with a lower average price this year than last. The downward shift comes in the wake of Asda's commitment to keep at least 100 frozen lines at £1 for the full year, which prompted suppliers to produce new pack sizes specifically for this price point. Other price drops, like the 0.6% monthly drop in meat and fish prices, were also fuelled chiefly by promotions rather than market fundamentals.

Prices might be more or less stable for now, but with the weak pound and global recovery, there's no guarantee they'll stay that way for long.

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