Food and Inflation

Readers Question How does the price of food affect inflation?

inflation CPI basket

Source: Statistics.gov.uk pdf – CPI weights for 2008

The CPI is calculated using a basket of goods.

The sub group food accounts for 10.2% of the total CPI weight. Therefore, if food prices increase these account for 10% of the total inflation rate.

Very roughly if food prices increased by 5%, the CPI would increase by 0.5%.

Therefore food is relatively important. The table also suggests that food prices tend to be more volatile than other components. Food is also more subject to seasonal variations in prices. The seasonally adjusted inflation rate takes this into account.

In 2008, rising food prices contributed to cost push inflation.

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