Food price growth slows for fourth month, say shops

Food price inflation has slowed for the fourth month in a row but remains "incredibly high", figures show.

Market research firm Kantar said grocery prices rose by 14.9% in the four weeks to 9 July compared with a year ago, down from 16.5% in June.

It said Britons were spending more on supermarket promotions to save money.

Food prices is one of the biggest contributors to the UK's overall rate of inflation which remains stubbornly high.

New figures due on Wednesday are expected to show that the overall pace of price rises slowed to 8.2% in June, from 8.7% in May.

However, the Bank of England is expected to continue raising interest rates, which it has been using as a tool to curb rising prices and to bring inflation down back to its 2% target.

The increase in the cost of the weekly food shop has been hitting households hard, and the Bank has previously warned it has taken longer than expected for falls in wholesale costs to filter through to supermarket shelves.

Fraser McKevitt, head of retail and consumer insight at Kantar, said grocery price inflation had been falling for four months in row, which would come as "good news for many households although, of course, the rate is still incredibly high".

He said the "boost" to promotional spending had helped to slow the pace of price rises.

But he cautioned that prices were rising quickly last summer, so the latest slowdown is "partially down to current figures being compared with those higher rates one year ago".

The prices of basics such as pasta, eggs and cheese have rocketed since last year as food producers struggled with supply chains issues and soaring energy bills.

However, these pressures appear to be easing while Kantar said UK shoppers had dramatically changed their behaviours to cut costs, "whether by trading down to cheaper products or visiting different grocers".

The research firm said spending on promotions went up for the first time in two years in June, to account for just over a quarter of all UK grocery spending.

Meanwhile, retailers are "ramping up" loyalty card deals such as Tesco's Clubcard Prices and Sainsbury's Nectar Prices.

At the current level of inflation, Kantar said households would have spent £683 more on their annual grocery bill to buy the same items as they did a year previously.

But Mr McKevitt said customers had limited this rise to just £330 by adapting their habits, "well below the hypothetical £683".

According to official figures, food price inflation, which is the rate at which prices for groceries have risen compared to the year before, was 18.3% in May, down slightly from 19% in April. That is close to its highest rate in nearly 45 years.

Supermarkets have been accused of not passing on falling wholesale costs to consumers, prompting the competition watchdog to launch a probe.

However, grocers deny profiteering and have cut the price of some basics like milk.

The latest Kantar figures come as separate research from Lloyds Bank suggests British food manufacturers - whose customers include wholesalers and retailers - cut prices for the first time in more than three years in June as cost pressures began to ease.

But Lloyds said the drop - the first since February 2020 - could be "cancelled out" by the strong levels of consumer demand which is putting pressure on prices.

Meanwhile, Kantar said competition between the UK's grocery chains remains intense.

Aldi was again the fastest growing supermarket in June, with sales up by 24% compared with a year ago, followed closely by budget rival Lidl on 22.3%.

Sainsbury's is seeing the fastest growth of the bigger supermarkets, with sales up 10.7% year on year, followed by Asda at 10.5% and Tesco on 10.2%.