Chancellor Jeremy Hunt welcomed the easing in UK grocery prices for a 4th consecutive month ahead of Wednesday’s eagerly anticipated official inflation data.
According to Kantar, the annual rate of inflation in grocery prices has slowed to 14,9% in the four-week period ending July 9 from 16,5% in the preceding month.
Hunt stated that consumers should “hopefully start to see” the effects of lower energy prices on supermarket shelves.
He added that “food inflation was caused by the global energy cost rocketing, and supply chain being affected.”
We’re keeping a close eye on both issues to ensure that consumers benefit from the resolution of these two issues. We’re beginning to see this.
Reuters polled economists who expect that the headline UK Inflation figure for the month of June, which will be released by the Office for National Statistics this Wednesday, will decline from 8.7% to 8.2%.
They also expect that the core inflation rate, which excludes energy and food prices, will remain unchanged at 7.1%.
The latest grocery price data has sparked a cautious optimism among government ministers, who insist that Rishi sunak can still achieve his goal of halving the inflation rate to 5.4% by the end the year.
One Treasury insider said, “For the first three years in a row, food manufacturers are starting to reduce prices.” It will take some time for the effect to be felt, but this is a positive sign.
The food manufacturers have always felt the pinch as wholesale costs continue to fall. “Supermarkets have low profit margins and are highly competitive.”
Fraser McKevitt is the head of Kantar’s retail and consumer insights. He said that the slowdown of grocery inflation will be good for many households.
The official said that the latest drop in wholesale energy and food costs is partly due to comparisons with rates from a year ago, when Russia invaded Ukraine on a full-scale basis. The official figures for May showed that, while the price increase in food and non-alcoholic drinks was still high, it had slowed to 18.3 percent in May from 19.9 percent in April.
Susannah Streeter of financial services firm Hargreaves Lansdown warned that food prices could “stay sticky” if Russia did not exit the Black Sea grain agreement, and refused to guarantee safe passage to ships exporting corn and wheat.
The UK’s food inflation is still higher than the US where it is 5.7% and the Eurozone where it is 11.7%.
Victoria Scholar, Head of Investment at Online Investment Platform Interactive Investor, said that this was partly due to Britain’s “reliance upon imports from overseas and freak weather conditions which have limited crop supply”.
Some MPs have claimed that supermarkets “profiteer” by increasing prices beyond what is necessary. This claim has been strongly denied by the supermarkets.
Kantar found that supermarkets with lower prices were the most successful food retailers.
Aldi had the fastest growing grocery store, with sales increasing by 24 percent annually. This pushed Aldi’s market share up to 10.2 percent, from 9.1 percent a year earlier.