Rising food prices may crimp UK consumer spending later this year but food inflation is a much bigger issue in emerging economies – the average weight of food in the CPI baskets of 120 non-OECD countries was 37% in 2006, according to a 2008 IMF study, versus 10% in the UK currently. (Food is much more important for consumers in these economies than fuel, with a 7% average weight in 2006.)
Chinese CPI food inflation rose to an annual 7.5% in August and may reach 9% by October, judging from data on edible agricultural product prices – see chart. (Product prices suggest a further increase of 1% or more in the CPI food index, which was little changed between August and October last year.) With food accounting for one-third of the CPI basket, this could push headline CPI inflation up from 3.5% currently to about 4%.
