Food inflation is now expected to reach 3.9 per cent by Christmas, significantly below earlier forecasts that warned price growth could hit as much as 10 per cent by the end of the year.

The Food and Drink Federation has sharply revised down its outlook for food and non-alcoholic drink inflation, offering some relief to shoppers ahead of the crucial festive trading period.

The industry body had previously forecast inflation of between 9 per cent and 10 per cent by December following disruption to global energy markets and supply chains caused by the conflict in Iran.

However, its latest forecast now puts December inflation at 3.9 per cent, reflecting stronger-than-expected resilience from manufacturers and more limited energy-price pressures than first feared.

Despite the improved Christmas outlook, the FDF warned that price pressures have not disappeared.

Inflation is expected to continue rising through next year, reaching a peak of 6.4 per cent in July 2027 before remaining above historic averages during the second half of the year.

The trade body said food manufacturers had worked to absorb higher costs and protect shoppers from the initial impact of the Middle East conflict, but warned that businesses were reaching the limits of how much pressure they could take.

Gas prices have more than doubled since February, while diesel prices have climbed 28.6 per cent since the start of the conflict.

Ingredient costs have also risen sharply, with wheat up 45 per cent, cocoa more than doubling, rice climbing 60 per cent, sugar rising 27 per cent and coffee up 22 per cent. UK-grown produce has increased by almost 10 per cent over the past year.

Extreme weather is adding further strain after droughts across the UK and Europe disrupted crops and pushed up the cost of fruit, vegetables and grains.

FDF chief executive Karen Betts said manufacturers had kept food prices as low as possible during the energy shock but could not absorb higher energy, logistics and packaging costs indefinitely.

She warned that consumers were still likely to face sustained price increases into 2027 unless government action helped reduce the cost burden on producers.

Food prices have already risen by almost 40 per cent since 2020.

According to the FDF, a weekly grocery shop costing £100 at the start of 2020 would cost around £138.60 today and could reach approximately £147.50 by next summer if its forecast materialises.

The revised forecast nevertheless represents a significant improvement on the outlook earlier this year, when the FDF warned that disruption around the Strait of Hormuz could send food inflation above 9 per cent by December.

The more moderate Christmas forecast could give supermarkets and shoppers some breathing room during the sector’s busiest trading period, although manufacturers remain under pressure from energy, commodity, packaging and regulatory costs.

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