Ulster Bank chief economist Richard Ramsey believes food inflation will become a major factor in the Northern Ireland economy in the second half of 2022 and possibly beyond.
He recently spoke at an event in Belfast held to confirm across the board’s sponsorship of this year’s Balmoral Show.
Ramsay presented its annual Ulster Bank Ulster Fry Index, which shows the price of all items making up the cooked breakfast ‘measure’ increased over the year to the end of February, using the UK Retail Price Index (RPI). will.
Milk recorded the largest price increase in the index, up 16.7% over the 12 months. There were also strong price increases for a number of other items, including eggs (8.2%), butter (6%), mushrooms (7.1%), bread (5.6%) and sausages (4.3%).
The average inflation rate for items included in the index rose by 6.4% over the past year, taking the index to its highest level since March 2014. This was the peak of the Ulster Fry Index and coincided with another lively crisis.
Challenges with food inflation
Ramsey went on to point out that the Index carries a more important message this year than ever before.
He explained: “Food accounts for a significant part of household expenses. ‘Food and drink’ is also a key sector of Northern Ireland’s economy.
“Thus, understanding how food prices are changing gives us insight into both the current state of consumer finances and some of the challenges facing the agri-food industry.
“The fact that we are now in a new cost of living crisis means it is imperative to create an understanding of price increases and cost pressures and their causes.
“What the Ulster Fry Index is telling us is that the prices of essential items like milk and bread are rising very sharply, while households are also grappling with soaring energy bills.”
According to the bank representative, the index will only go in one direction for the foreseeable future, and that is up.
“With energy prices already on the rise, as well as the disruption to the global food supply chain due to the war between Russia and Ukraine, the Ulster Fry Index is expected to experience double-digit inflation over the next 12 months. This would see the Ulster Fry Index hit a new record high,” he explained.
“Right about this time two years ago we thought we were going to hit a food crisis. People hoarded food in anticipation of supply shortages and empty shelves, despite repeated assurances from industry and politics.
“The reality was that the food and retail industries pulled out all the stops to keep the supply lines open and feeding us,” Ramsay added.
The Ulster Bank economist explained that two years later, a new and worrying food crisis is looming for various reasons.
He said that Russia and Ukraine are two of the most important producers and exporters of agricultural commodities in the world.
“Together, the two countries export one in eight of all calories traded globally. What Saudi Arabia is to oil, Ukraine and Russia are to grain,” Ramsay said.
“And don’t forget that grains are not only a direct source of food, but also an important indirect source of food as they are fed to the livestock, which we then consume.
“Nutrition problems will further fuel economic nationalism due to the scramble for food security, which means the further unraveling of globalization or de-globalization.
“Indeed, such is the concern about the food supply that countries are now hoarding and hoarding by banning exports.”