| Year | Global Agricultural Price Index (% annual change) | UK Food Price Inflation (% annual change) | UK Real GDP Growth (%) |
|---|---|---|---|
| 2021 | +18.5 | 2.1 | 7.5 |
| 2022 | +22.1 | 10.5 | 4.3 |
| 2023 | +12.4 | 14.2 | 0.1 |
| 2024 (Est) | +5.2 | 6.8 | 0.5 |
The UK is a net importer of food and agricultural inputs, importing over 40% of its total food supply. When global prices of basic grains, fertilizers, and animal feed rise, these costs quickly feed through the domestic supply chain. UK food manufacturers face significant margin compression unless they pass these costs onto supermarkets, which in turn pass them onto consumers. Furthermore, rising fertilizer costs—linked heavily to natural gas prices—increase the operating costs of domestic crop production, compounding the supply-side shock.
Extract C states: 'Sustained high agricultural commodity prices have squeezed household budgets, forcing lower-income families to cut back on discretionary spending. However, not all sectors of the economy suffer equally; higher farm-gate prices may incentivize structural investments in domestic agricultural efficiency and agri-tech.'
Use the data in the extracts and your knowledge of economics to assess the likely impact of a sustained rise in global agricultural commodity prices on the macroeconomic performance of the UK economy.
187 exam-style questions on AQA A Level Economics 2.1 The measurement of macroeconomic performance, covering 2.1.1 The objectives of government economic policy, 2.1.2 Macroeconomic indicators, 2.1.3 Uses of index numbers, and 2.1.4 Uses of national income data (A-level only). Each one has a worked solution and a mark scheme showing where the marks go.