AS THE PRICE of a barrel of oil falls to under $50 the global financial industry is preparing for further deflationary activity such as lower food prices which could offer a huge boost to the out of home market.
The latest Consumer Price Index (CPI) inflation figures show that between September 2013 and September 2014 food prices fell by 1.5% fuelled by lower oil prices which is making the cost of rearing cattle, for example, cheaper. The cost-savings are likely to pass through the supply chain leading to overall better value-for-money meat.
This news comes as welcome to both consumers and the foodservice sector, as more money in pockets could produce a boom in spending out of home and give a much-needed drive for growth in the sector.
The agricultural community is also expected to benefit from falling oil prices, though are being faced with their own decreases, as the Producer Price Index points to a UK wheat price decrease of around 21% in the 12 months to September 2014.
Deflationary actions could, however, lead to currency devaluation – as is the case in Russia – increased interest rates which would hit borrowers and sustained falling oil prices could lead to job cuts.