This easing is likely to represent momentary respite rather than sustained relief, as conflicts and energy shocks threaten to drive cost increases in the coming months.
Deflation in March was largely driven by the delayed transmission of costs in UK supply chains. Favourable seasonal transitions for fresh vegetables and effective forward-buying strategies in categories of the Index including oils & fats and dairy have temporarily shielded the domestic market from broader global volatility.
With many international markets now volatile, global benchmarks across all major commodity groups, like cereals, meat, dairy, vegetable oils and sugar, are now rising simultaneously.
Conflict in the Near East has also triggered a massive spike in global crude oil prices. This threatens to erase domestic deflation in the UK and dramatically inflate wholesale prices as we move towards the summer.
The energy shock is expected to be a catalyst for high inflation across the foodservice sector, with high oil prices rapidly driving up freight, packaging, agricultural inputs and energy-intensive manufacturing costs.
Shaun Allen, chief executive of Prestige Purchasing, said: “While a 1.4% drop in the Index provides some welcome, short-term relief, operators must not be lulled into a false sense of security. We are currently in the eye of the storm. The reality is that global food commodities are rising across the board, and the geopolitical situation in the Near East has sent energy markets into overdrive.
“The UK supply chain has shown remarkable resilience to absorb these shocks so far, but suppliers cannot hold back this tide indefinitely. Operators should view this temporary dip as a vital, rapidly closing window to lock in contracts and fortify their procurement strategies before these global pressures inevitably break through to the UK market.”