UK grocery inflation has dropped to its lowest level since February 2022, before Russia’s invasion of Ukraine, according to sector data that suggests the surge in food costs is finally fading.
Annual grocery inflation eased to 4.5 per cent in the four weeks to March 17th, down from 5.3 per cent in the previous month, according to the research company Kantar.
Fraser McKevitt, head of retail and consumer insight at Kantar, said grocery inflation had “come down significantly since hitting an eye-watering peak” of 19.2 per cent in March 2023, as measured by official data. Last month, the agency reported falling prices of butter, milk and toilet tissue.
Kantar data provides an early indication of food price pressures ahead of the official price statistics published on April 17th.
In February, the official food inflation reading dropped to 5 per cent from 7 per cent month-on-month and well below the 45-year high reached in March 2023. The prices of chocolate, fruit and fish dropped, with fish costs falling marginally year-on-year.
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Food costs surged following Russia’s invasion of Ukraine, hitting the poorest households hardest, as they spend a larger share of their income on necessities.
Food prices were the main driver of the larger-than-expected fall in official headline inflation to 3.4 per cent in February from 4 per cent the previous month, with Kantar data suggesting the trend continued this month.
Andrew Bailey, governor of the Bank of England, said last week he had “an increasingly positive story to tell” about inflation. “The global shocks are unwinding and we are not seeing a lot of sticky persistence [in inflation] coming through at the moment. That is the judgment we have to keep coming back to.”
Markets are pricing the BoE to start cutting interest rates from a 16-year high of 5.25 per cent from the summer, taking the benchmark rate to 4.5 per cent by the end of the year.
Kantar also showed that sales of branded goods and purchases in more expensive supermarkets grew at a robust pace, which contrasts with the trend for most of the past two years.
The online upmarket retailer Ocado registered the fastest sales growth this month at 9.5 per cent, benefiting from a sustained voucher campaign that helped attract customers.
Sales of branded goods pushed just ahead of own-label items, with sales increasing by 6.1 per cent and 4.7 per cent, respectively, in the past four weeks. – Copyright The Financial Times Limited 2024
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