UK food inflation fell to 1.3% in July, its lowest rate since September 2021, even as wider inflation rose and household energy costs increased sharply. The divergence highlights contrasting pressures facing grocery and non-food retailers.
Food and non-alcoholic beverage prices rose 1.3% in the year to July, down from 1.7% in June, according to the Office for National Statistics (ONS). The annual rate was last lower in September 2021, when it was 0.8%.
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The slowdown came as the UK’s Consumer Prices Index (CPI) inflation rate increased from 2.6% in June to 2.9% in July. The rise in headline inflation was driven mainly by housing and household costs, particularly gas and electricity.
Food inflation slows to 1.3%
Food and non-alcoholic beverage prices were broadly unchanged between June and July, compared with a 0.4% increase during the same period in 2025.
The category’s contribution to annual CPIH inflation fell to 0.12 percentage points, its smallest contribution since October 2021.
Several food categories helped drive the slowdown. Meat prices fell in July after rising during the same month a year earlier, with beef and breaded chicken among the products exerting downward pressure. Vegetable prices also fell by more than they did a year earlier.
Other categories moved in the opposite direction. Fish prices increased after falling in July 2025, while bread and cereals rose after showing little change a year earlier.
The figures therefore reflect different price movements across grocery categories rather than a broad fall in food prices.
Supermarket competition keeps pressure on prices
The British Retail Consortium (BRC) attributed the easing partly to strong competition between grocery retailers.
“Strong competition among grocers is firmly keeping a lid on people’s weekly shop, despite successive supply chain shocks,” said Harvir Dhillon, lead economist at the BRC.
Dhillon pointed to falling prices for products including pasta, olive oil and fresh fruit as retailers competed for price-conscious consumers. The BRC also said retailers were using discounts on everyday essentials.
The ONS data do not quantify how much supermarket competition contributed to the slowdown in food inflation. The BRC’s assessment is therefore an industry interpretation of the latest figures rather than an explanation established by the ONS data.
For supermarkets, the combination of slower food inflation and strong price competition creates a commercial challenge. Retailers must compete for shoppers while managing their own operating costs.
Grocery inflation also eases
Recent retail data point in the same direction.
Worldpanel by Numerator reported that UK grocery price inflation fell to 2.1% in the four weeks to 9 August, down from 2.6% in its previous report and the lowest rate since October 2024. Grocery sales rose 2.5% year on year during the period, while 31.3% of sales involved promotions.
The Worldpanel measure is not directly comparable with the ONS food CPI rate because the two datasets use different methodologies. However, both indicate a more moderate grocery pricing environment.
Worldpanel said the latest easing reflected strong competition between supermarkets, shoppers resisting price increases and improved supplier hedging. It also reported that average grocery spending was £410 over the four-week period, £14.24 lower than in the previous period.
The data suggest that price remains a significant factor in grocery purchasing decisions, with promotions continuing to account for a substantial share of sales.
Higher energy bills squeeze budgets
The easing in food inflation contrasts sharply with rising costs elsewhere in household budgets.
Annual inflation for housing and household services increased from 2.7% in June to 4.1% in July, making the largest upward contribution to the rise in headline inflation. Gas prices were 14.7% higher than a year earlier, while electricity prices increased 3.6%.
The increases followed the latest change to the energy price cap. Ofgem estimated that the typical annual dual-fuel bill for a household paying by direct debit rose by £221 to £1,862 for the July-to-September period.
The divergence creates a mixed backdrop for consumer spending. While grocery prices are rising relatively slowly, higher energy bills could leave households with less disposable income for other purchases.
That could create greater pressure for discretionary retailers selling products such as fashion, electronics and homewares, where purchases can be delayed or avoided more easily than essential groceries.
Retailers face margin and demand pressure
The latest figures leave different parts of the retail sector facing contrasting pressures.
Grocery retailers are competing strongly on price at a time when slower food inflation could make it more difficult to pass higher operating costs through to consumers.
Energy costs also affect retailers directly through stores, warehouses and distribution operations. Employment and other business costs add to the pressure.
For discretionary retailers, the bigger concern is demand. Higher household energy bills could divert spending away from non-essential categories even as grocery inflation continues to moderate.
The result is a divided retail environment. Grocery retailers are operating against a backdrop of relatively low food inflation and continued price competition, while other retailers could face weaker demand if household budgets become more constrained.
What it means for retail
The July data point to a more moderate grocery pricing environment, but they do not signal an end to wider cost pressures.
UK food inflation is now at its lowest rate since September 2021, while Worldpanel’s latest data show grocery inflation at its lowest level since October 2024. At the same time, higher energy costs have pushed overall UK inflation higher.
For grocery retailers, the key challenge will be maintaining competitive prices while managing operating costs. For discretionary retailers, the focus is more likely to be on whether higher essential household bills weaken demand.
The latest figures therefore point to two different retail pressures: intense competition is keeping grocery price growth relatively subdued, while rising household costs could continue to weigh on wider consumer spending.
