Rising food prices are vote losers. So are climbing petrol prices. Around the world, food prices are beginning to escalate – not helped by the latter.

For a long time, British consumers, the Government and many retailers have become accustomed to a period of falling food prices, or, at worst, a level of food inflation that lags the Retail Prices Index. But structural issues – driven mainly by the increasing population and affluence of China and India – mean this era is coming to an end.

Obviously, this is not quite how the UK’s food retail giants are presenting it. They struggle to admit the degree to which they have raised prices in any previous reporting period. And they are about as likely to say they expect to raise prices by another 5 per cent in the next six months as you are to see a queue of turkeys waiting to enter church for an Advent service.

Food prices are a political hot potato in many countries, but they are especially prominent in the UK with the albatross of an OFT investigation hanging around the neck of the grocery industry.

Arguably, they are even more of a cause célèbre in China, where the government is struggling to contain overall inflation. A month ago, it was reported that three Chinese housewives were trampled to death outside a Carrefour that had advertised a 20 per cent off promotion on rapeseed oil – a commodity that had been rising steadily in previous months. Not a good way to lose voters.

The reporting season of food manufacturers has recently taken place and it is evident manufacturers are having the usual difficulty of sustaining margins during a period when raw material costs are following global commodity trends upwards.

But surely we do not want our food manufacturing industry to follow in the wake of carmakers? Importing more foodstuffs than 40 per cent – the present figure – would create even less resilience in the economy.

Why should non-food retailers worry about all this in the UK? Because in 2008, as the economy slows, an increasing proportion of your shoppers’ incomes will be spent on feeding the family and transport. Whereas falling food prices have facilitated growth in the non-food sector over the past decade, the process is going into reverse.

In the meantime, we all need to do a better job to communicate to the public at large that good food is worth paying for and that food prices will inevitably rise in the years to come.

In this new era, take government food inflation data with a pinch of salt. On the other hand, that would be very bad for your diet, wouldn’t it?

Paul Smiddy, head of retail research, HSBC

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