Coronavirus: Shoppers warned food prices could rise despite drop in inflation

Shoppers have been warned food prices could rise later this year, despite a downward trend in overall inflation in the UK.

The latest official figures published on Wednesday show the rate of inflation has dropped slightly as oil prices (BZ=F, CL=F) have tumbled.

Average prices for common goods and services in Britain were up 1.7% in February compared to a year earlier, in line with analysts' forecasts and down from 1.8% in January. Falls in the cost of fuel and video games were among the main reasons the pace of price increases slowed.

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Supermarket shoppers form epic queues
In Pictures: Coronavirus contrast of empty motorways and supermarket queues
People form a long queue snaking a long way round the parking lot, as they wait to enter a wholesaler supermarket in Coventry, England, early Saturday March 21, 2020. The government has ordered the closure of public gathering places like restaurants, pubs, gyms and leisure centres in an effort to control the spread of coronavirus. For some people the COVID-19 coronavirus causes mild or moderate symptoms, but for others it causes severe illness. (Jacob King / PA via AP)
In Pictures: Coronavirus contrast of empty motorways and supermarket queues
People form a long queue snaking a long way round the parking lot, as crowds wait to enter a wholesaler supermarket in Coventry, England, early Saturday March 21, 2020. The government has ordered the closure of public gathering places like restaurants, pubs, gyms and leisure centres in an effort to control the spread of coronavirus. For some people the COVID-19 coronavirus causes mild or moderate symptoms, but for others it causes severe illness. (Jacob King / PA via AP)
In Pictures: Coronavirus contrast of empty motorways and supermarket queues
In Pictures: Coronavirus contrast of empty motorways and supermarket queues
People wait outside a Tesco Express store at 10.30am on Saturday morning as some supermarkets are restricting opening hours in response to the Coronavirus outbreak. Photo credit should read: Katie Collins/EMPICS
People queue outside of a Costco store in Watford, as the spread of the coronavirus disease (COVID-19) continues, Britain, March 19, 2020. REUTERS/Paul Childs TPX IMAGES OF THE DAY
People queue outside of a Waitrose supermarket in St Albans, as the spread of the coronavirus disease (COVID-19) continues, Britain, March 19, 2020. REUTERS/Matthew Childs
People queue to shop at Sainsbury's supermarket in Leamington Spa, Warwickshire, where the store had announced that the first hour of opening would be for elderly and vulnerable customers.
Early shoppers queue and wait in line for the opening of a supermarket in Rugby, England, Thursday, March 19, 2020. According to the World Health Organization, most people recover in about two to six weeks, depending on the severity of the illness. Some supermarkets are limiting the number of similar items shopper can buy to try and halt hoarding and panic buying, when the supermarket groups and government say there is no shortages in the supply chain. (AP Photo/Martin Cleaver)
Customers wait in a long queue to enter a Costco members wholesale outlet in Farnborough, west of London, on March 19, 2020. - Britain's supermarkets stepped up efforts to safeguard supplies, especially for vulnerable and elderly customers, as the sector battles stockpiling caused by coronavirus panic. (Photo by ADRIAN DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)
Customers wait in a long queue to enter a Costco members wholesale outlet in Farnborough, west of London, on March 19, 2020. - Britain's supermarkets stepped up efforts to safeguard supplies, especially for vulnerable and elderly customers, as the sector battles stockpiling caused by coronavirus panic. (Photo by ADRIAN DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)
PLYMOUTH, UNITED KINGDOM - MARCH 19: Shoppers queue outside a Sainsbury's supermarket prior to opening in Plymouth on March 19, 2020 in Plymouth, United Kingdom. The store allowed only the elderly and vulnerable into the store for the first hour. After spates of "panic buying" cleared supermarket shelves of items like toilet paper and cleaning products, stores across the UK have introduced limits on purchases during the COVID-19 pandemic. Some have also created special time slots for the elderly and other shoppers vulnerable to the new coronavirus. (Photo by Dan Mullan/Getty Images)
PLYMOUTH, UNITED KINGDOM - MARCH 19: Shoppers queue outside a Sainsbury's supermarket prior to opening in Plymouth on March 19, 2020 in Plymouth, United Kingdom. The store allowed only the elderly and vulnerable into the store for the first hour. After spates of "panic buying" cleared supermarket shelves of items like toilet paper and cleaning products, stores across the UK have introduced limits on purchases during the COVID-19 pandemic. Some have also created special time slots for the elderly and other shoppers vulnerable to the new coronavirus. (Photo by Dan Mullan/Getty Images)
NORTHWICH, UNITED KINGDOM - MARCH 19: Senior citizens queue to shop at Sainsbury's Supermarket on March 19, 2020 in Northwich, United Kingdom. A queue of approximately 600 old age pensioners formed before the market opened at 7am as the shop opened specially for the elderly. After spates of "panic buying" cleared supermarket shelves of items like toilet paper and cleaning products, stores across the UK have introduced limits on purchases during the COVID-19 pandemic. Some have also created special time slots for the elderly and other shoppers vulnerable to the new coronavirus. (Photo by Christopher Furlong/Getty Images)
People queue outside of a Costco store in Watford, as the spread of the coronavirus disease (COVID-19) continues, Britain, March 19, 2020. REUTERS/Paul Childs
People queue outside of a Costco store in Watford, as the spread of the coronavirus disease (COVID-19) continues, Britain, March 19, 2020. REUTERS/Paul Childs
People queue outside of a Costco store in Watford, as the spread of the coronavirus disease (COVID-19) continues, Britain, March 19, 2020. REUTERS/Paul Childs
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The consumer price index (CPI) inflation data shows the change in the cost of a typical 'basket' of goods and services bought by UK households. The inflation data was published by the Office for National Statistics (ONS) on Wednesday.

Concerns have grown recently about price hikes for certain goods amid the coronavirus pandemic, which has fuelled consumer stockpiling and disrupted manufacturers' global supply chains.

Britain's Competition and Markets Authority warned firms not to exploit the pandemic through "unjustifiable prices" on Tuesday, after Sports Direct admitted it had hiked the price of some sports equipment.

There is no sign of such an impact in the latest inflation figures. But they were compiled in February, before the pandemic had begun to have a significant economic impact.

Ruth Gregory, senior UK economist at Capital Economics, said food prices could rise later this year despite supermarkets widely holding down prices so far despite soaring demand.

She said supply chain troubles could also push up the cost of some other goods, though expects falling demand to keep a lid on most prices. She predicts the coronavirus will drag overall inflation below 1% in the months ahead, with falling fuels costs, air fares and wage growth exerting particular downward pressure.

Michael Hewson, chief market analyst at CMC Markets, said shortly before the figures were released on Monday that falling oil prices in recent months had put downward pressure on overall prices. Saudi Arabia triggered a price war with Russia earlier in March, sending oil prices spiralling.

The inflation figures are closely watched as a sign of the economic health of the UK economy, and the Bank of England's likely response. The central bank is mandated to keep inflation low and stable, with a 2% target.

It comes a day after separate figures suggested UK business activity has nosedived at a faster rate in the past month than at the height of the financial crisis more than a decade ago.

Experts warned the coronavirus and government lockdown in Britain and its trading partners could trigger the worst UK recession in modern history.

The slowdown between February and March marks the sharpest monthly decline on the flash composite UK purchasing managers' index (PMI) since IHS Markit began collecting the figures in 1998.

Both manufacturing and the UK's dominant services sector, including everything from banking to retailers, have suffered sudden and steep declines in work. Firms say demand for goods and services has collapsed as growing numbers of firms and households shut their doors.

- This article first appeared on Yahoo

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