Inflation: who pays the most?

Inflation causes price rises in supermarkets. And it seems some of us experiencing higher price rises than our fellow shoppers. Here’s why.

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In response to uneven inflation in supermarkets, writer and campaigner Jack Monroe announced that they intend to create a different measure for inflation in food retail, “…along with a team of economists, charitable partners, retail price analysts, people working to combat poverty in the UK, ex-staff from the Office for National Statistics and others who have volunteered their time and expertise, I am compiling a new price index.”

Apparently, the effects of inflation are not being experienced equally by everyone at the supermarket. Jack Monroe warns that supermarket value ranges are disappearing, or are no longer as cheap, while prices in some other ranges are more stable.


Are inflation measurements the same for everyone?

The Consumer Prices Index includes a range of goods – basic, non-essential and luxury. This doesn’t fully reflect the effect of inflation on those who can only afford essentials. That’s why, for some people, rising food prices make it seem as though inflation is much higher than 5.4%. 

The Office for National Statistics admits that with regard to food prices there is a “relatively high variation in observed price changes between the individual goods in this area.” Therefore, while non-essential goods are included in the measurements that help to calculate inflation, it underestimates the effect on people who are not in a position to afford non-essential goods.

This is especially the case when food prices are very unstable, but prices of luxury goods are up by only a small amount.

Is inflation only a problem for people on a low income?

It’s easy to cut back on spending if there are cheaper products. That becomes impossible when you are already buying the cheaper products to start with. Using savings and credit cards can help out in times of temporary price inflation. Unfortunately, this is not ideal or possible for all. Those with very little or no disposable income have nowhere to go.

If your budget follows the 50/30/20 budget rule, where almost half of your income is saved and disposable, then it won’t seem to matter too much if some of the spare half is spent on essentials. Nevertheless, continuing and excessive price hikes will be digging into your savings or other expenditure to a certain extent. You might need to put your savings in a higher interest account to offset. 

Are some supermarket price rises exceeding the current inflation rate?

Supermarkets are able to spread their costs around all their ranges. So while you might not notice a price increase on a luxury ready meal, there may be an extra 20p on a tin of baked beans. Therefore those able to pay more could be cushioned with smaller percentage price rises. Supermarkets can use prices to attract the type of customer they prefer.

On a Twitter thread, Jack Monroe lists a rise in the price of the cheapest pasta from 29p to 70p, peanut butter from 62p to £1.50 and rice from 45p to £1. This represents a very significant percentage increase above inflation on staples. 


What are the alternatives to supermarket inflation?

While there is competition between supermarket chains, there is less competition with supermarkets on the whole. Therefore, pricing habits can be replicated across the big supermarket chains. For example, when one ditches their value range, another follows suit. Many items, like strawberries, are priced at a flat rate and rounded up to the nearest pound, whatever the season.

There are three ways to challenge the distribution of price increases in supermarkets:

  1. Shop elsewhere. Markets and independent high street shops sometimes offer much better deals than supermarkets.
  2. Switch to one of the cheaper supermarkets, like Aldi, Lidl or Iceland.
  3. Refuse to pay higher prices on selected goods and choose different products.

In Dario Fo’s 1974 play Can’t Pay? Won’t Pay!, a group of women refuse to pay for their shopping because of excessive price rises, and carry off their goods for free. They ignore the supermarket manager’s explanation that the inflation is due to ‘market forces’, claiming, “We’re the market forces.” While Dario Fo was rightly satirising the fact that food pricing can be a political choice, this reaction would get people in trouble in real life.

Should everyone be worried about inflation?

Both producers and consumers should have some influence on the price of essentials, as well as retailers. With consumers shopping in the same supermarkets all the time, or not taking note of prices, increases above inflation become much easier for supermarkets to implement. 

You may not need to dip into your savings or rely on your credit card for the weekly shop. Nevertheless, it’s still worth questioning where your money is going.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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