Has turning point rise in food prices been reached?

In June, food inflation fell for the third month in a row. Will that soon translate into cheaper shopping carts too? At least supermarket food prices seem to be stabilising. The turnaround is partly due to food companies. Indeed, they have partly absorbed the increased costs with lower margins.

Food inflation in decline

In June, food price inflation fell back to 14.4%. After peaking at 17%, we are now recording a decline for the third month in a row. With some delay, we could soon see this in the supermarket too, as food prices are stabilising. In June, for instance, almost 40% of food products in the shopping trolley were cheaper than the previous month. Compared to April, half of food products cost less, while only 1 more product out of 4 reached a price spike in June.

Is downward trend continuing?

With food price inflation down for three months now, this should logically translate into a cheaper shopping trolley. However, there is no certainty about this. This is because food and drink price movements depend on numerous factors beyond the control of companies. Think, for instance, of weather conditions or raw material prices on the world market.

No grab inflation in Belgium

The sky-high inflation, incidentally, led to a neologism: graaiflation. This means that companies would take advantage of general price increases to raise their prices by a percentage higher than their own cost increases.

According to the National Bank of Belgium (NBB), the Belgian food industry is not guilty of this practice. In fact, quite a few food companies absorb up to 30% of the increase in production costs themselves by reducing their margins. Thus, according to the NBB, the price increases were not due to higher margins - quite the contrary - but rather to higher purchase costs and higher wages.