According to data from the sector, UK grocery inflation is now at single digits after 16 months of steep increases. This will give households hope that food prices can normalise in the months to come.
Research company Kantar reported on Tuesday that the annual rate of price increases at supermarkets in the four-week period ending October 29 was 9.7%, down from 11.5% in September. This is well below the peak of 17.5% in March.
The reading on Tuesday, the first to be in single digits for July 2022 suggests that the official food inflation number next week will continue to decline, helping overall inflation, and supporting real incomes.
The policymakers would welcome this as they aim to reduce the price growth rate from the current 6.7% to the target of 2%. It could also ease the pressure on the Bank of England, which is under pressure to maintain high interest rates for an extended period.
The Office for National Statistics reported last month that the price increase for food and non-alcoholic drinks was 12.1% in September. This is down from the 45-year-high of 19.2% in March. After the Russian invasion of Ukraine in 2022, wholesale food costs skyrocketed. The poorest households were hit the hardest. Last week, separate unofficial data showed UK Shop Price Growth Also, the rate of growth slowed to its lowest level in over a year.
Fraser McKevitt is Kantar’s Head of Retail and Consumer Insight. He said that the end of double digit growth in grocery prices inflation was a “big landmark for British consumers and retailers”.
He warned that households are still “feeling pinch” due to annual price drops in only a few large categories, including dried pasta, butter and milk.
Kantar says that consumers continue to prefer cheaper retailers and supermarkets over branded products. According to Kantar, discounters Lidl & Aldi had the highest annual sales growth at 14,7% and 13,2% respectively. This compares with 7,9% for the entire grocery sector.
The supermarkets have also continued to offer shoppers more deals, as the percentage of sales has increased in comparison to last year. This is something that only happened once during the past decade.
Myron Jobon, senior personal financial analyst at investment platform Interactive Investor said: “British shoppers are really happy to see that food inflation has started to ease.”
Separate data released on Tuesday by the British Retail Consortium (a trade association) and Barclays, a payments company, showed that the annual retail sales rate and consumer spending had slowed to a level well below the inflation rate, which indicates that consumers are cutting back their purchases.