Grocery prices are finally rising at “more normal levels” following last year’s record surge, as new figures today showed inflation for supermarket goods was just 2.4%.
Figures from market research firm Kantar show grocery price inflation for the four weeks to 12 May at its lowest since October 2021. The 2.4% rate of price rises, down from 2.9% in the prior four-week period, is now less than a percentage point away from the average pace in the 10 years before prices started to accelerate in 2021.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Grocery price inflation is gradually returning to what we would consider more normal levels.
“Typically, an inflation rate of around 3% is when we start to see marked changes in consumers’ behaviour, with shoppers trading down to cheaper items when the rate goes above this line and vice versa when the rate drops. However, after nearly two and a half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost of living crisis.
“Own-label lines are proving resilient, for example, and they are still growing faster than brands, making up over half (52%) of total spending. Sales of premium own label ranges continue to increase too, up by 9.9% compared with a year ago.”
Some items, such as chilled fruit juices and chocolate, are still seeing significant price rises, but prices of dairy products like butter and milk are falling.
But while prices have come back down to earth, the trend of discounters taking a larger share of the grocery market has continued. Lidl hit a new all-time high in market share, with a surge in bakery sales helping it to claim 8.1% of grocery sales, while Aldi secured a 10% market share.
Tesco continued to hold a comfortable lead over second-placed Sainsbury’s as the market leader. Ocado was again the fastest-growing grocer. Of the 10 grocers measures by Kantar, only Asda and the Co-Op saw sales fall.
McKevitt said the supermarket sector could get a boost this summer from big sporting events like the Euros. He said: “Major sporting events can have a big impact on grocery sales, particularly in categories like alcohol. During England’s quarter final match against France in the 2022 FIFA Men’s World Cup, take-home beer sales hit their biggest daily takings of the year outside of Christmas. Especially if it’s paired with warmer temperatures, this year’s summer of sport could deliver a welcome boost for the sector.”
The slowing in food prices could be a good omen ahead of April’s “momentous” inflation reading, published tomorrow. City economists predict that the figures could show consumer price inflation falling to the Bank of England’s 2% target for the first time in three years.
However, that may not guarantee a summer interest rate cut, as the Bank of England’s Monetary Policy Committee pays less attention to food prices, and has been paying closer attention to services inflation, which is expected to remain well above 5%.
