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Chancellor Jeremy Hunt has welcomed the easing of UK grocery price rises for a fourth consecutive month, ahead of eagerly awaited official inflation data on Wednesday.
The annual pace of grocery inflation eased to 14.9 per cent in the four weeks to July 9, down from 16.5 per cent in the previous month, according to research company Kantar.
It was the largest monthly slowdown since its peak in March and Hunt said that “hopefully” consumers were starting to see the effects of falling energy prices passing through to supermarket shelves.
“Food inflation was driven by the global cost of energy rocketing and supply chains being hit,” he added.
“Yet consumers should share the upside as both issues unwind, and we’re watching closely to make sure they do. Hopefully, that’s what we’re starting to see.”
Economists polled by Reuters expect the headline UK inflation figure for June, to be published by the Office for National Statistics on Wednesday, to decline to 8.2 per cent, from 8.7 per cent in May.
But they also anticipate that core inflation, which excludes food and energy prices, will be unchanged at 7.1 per cent.
The latest data on grocery prices heightened a mood of cautious optimism in government, with ministers insisting that Rishi Sunak can still hit his target of halving inflation to 5.4 per cent by the end of the year.
“For the first time in three years food manufacturers have started to cut prices,” said one Treasury insider. “It will take time to feed through, but it’s a good sign.
“With wholesale costs falling, the pinch point has always been the food manufacturers. The supermarkets are generally highly competitive with low profit margins.”
Fraser McKevitt, head of retail and consumer insight at Kantar, said the slowdown in grocery inflation “will be good news for many households, although, of course, the rate is still incredibly high”.
He added that because wholesale energy and food prices soared in the summer of 2022 following Russia’s full-scale invasion of Ukraine “this latest slowdown is partially down to current figures being compared with those higher rates one year ago”.
Last month’s official inflation figures showed that while price growth for food and non-alcoholic beverages was historically high, it eased to 18.3 per cent in May, down from 19 per cent in April.
Susannah Streeter, head of money and markets at financial services company Hargreaves Lansdown, cautioned that with Russia exiting the Black Sea grain deal and refusing to guarantee safe passage for ships exporting wheat and corn, there were concerns about food prices “staying sticky”.
UK food inflation remains far higher than in the US, where it is 5.7 per cent, and in the eurozone, where it stands at 11.7 per cent.
Victoria Scholar, head of investment at online investment platform Interactive Investor, said this was partly because of Britain’s “reliance on imports from abroad and freak weather conditions that have limited crop supplies”.
There have been claims by some MPs that supermarkets are “profiteering” from the inflationary environment by raising prices more than necessary — something they strongly deny.
Kantar said cheaper supermarkets were the best-performing food retail companies.
Aldi was the fastest-growing grocer, with annual sales up by 24 per cent. That pushed its market share to 10.2 per cent, up from 9.1 per cent a year ago.
