Good news for UK grocery prices
Key Points
- Food and non-alcoholic drink inflation fell to 1.7% in June 2026, its lowest since August 2024
- Restaurant and hotel prices rose 4.4% over the same period, up from 4.2% in May
- Hospitality made its biggest contribution to inflation since October 2024
- Headline CPI inflation fell to 2.6%, its lowest since December 2024
- Economists warn rising energy prices will push inflation back up within months
Supermarket prices rose just 1.7% in the year to June 2026 while restaurant and hotel prices climbed 4.4%, new figures from the Office for National Statistics show.
The group’s data shows a growing gap between what households pay at the till and what they pay when they go out. Food and non-alcoholic beverage inflation fell from 2.2% in May to 1.7% in June, its lowest annual rate since August 2024, and prices actually fell 0.2% on the month.
Restaurant and hotel prices moved the other way, rising 1.0% between May and June alone and pushing the annual rate up from 4.2% to 4.4%.
Hospitality now makes an outsized contribution to overall inflation. The ONS said restaurants and hotels added 0.49 percentage points to the annual rate in June, the largest contribution from the sector since October 2024. Food and non-alcoholic beverages contributed just 0.15 percentage points, the smallest since August 2024.
Slowing supermarket inflation
Chocolate led the fall in grocery prices, dropping by more in June 2026 than a year earlier.
Margarine and other vegetable oils, beef, dairy and vegetables also pulled the rate down, with oils, fats and dairy prices falling outright on the month. Bread and cereals, fish, fruit, hot beverages and soft drinks showed little change.
Richard Carter, Head of Fixed Interest Research at Quilter Cheviot, said grocery inflation slowing offers rare good news for the new government. “The good news for Burnham is that grocery inflation has slowed to its weakest rate since December 2024,” Carter said.
The wider inflation picture also improved. Headline CPI inflation fell from 2.8% to 2.6%, its lowest since December 2024, driven mainly by a sharp drop in fuel prices. Diesel fell 10.7 pence per litre between May and June to an average of 176.4 pence, while petrol fell 2.1 pence to 155.3 pence.
Services keep prices sticky
The divide between goods and services explains why eating out keeps getting more expensive while the weekly shop eases.
Goods inflation slowed from 2.0% to 1.7% in June, but services inflation held at 3.6%, reflecting higher labour and operating costs across hospitality.
Economists warn the overall relief will not last. James Smith, Chief Economist at the Resolution Foundation, said the fall “is welcome news for families and gives the new government some early breathing space of its own” but added it is “likely to prove short-lived” as renewed Middle East tensions push energy prices up and Ofgem’s price cap rises in July, with a further increase forecast for October.
