Tumbling energy costs and a price war between Britain’s supermarkets have slowed food inflation to its lowest rate for nearly two years in a boost for households trying to cope on stretched budgets.
The cost of meat, fish and fruit dipped in February, meaning food prices rose 5% on last year, down from 6.1% in January and the lowest since May 2022, according to the British Retail Consortium (BRC) shop price index.
Although the figures show prices are still rising, the rate is far lower than the double-digit increases consumers have consistently faced since rising energy prices triggered rampant inflation over the past two years.
The index showed food prices fell 0.1% in February on the previous month, its first monthly fall since last September.
“This was driven by easing input costs for energy and fertiliser while retailers competed fiercely to keep prices down,” said Helen Dickinson, the chief executive of the BRC.
A sharp fall in the wholesale price of gas has fed through into household energy bills, with the industry regulator Ofgem announcing last week that its price cap will fall 12%, or £238 to £1,690, from April. Meanwhile, there are increasing signs the major supermarkets are ramping up efforts to compete on price.
The cost of living crisis has weighed on retailers’ attempts to maintain their profit margins while attracting customers tackling increases in household bills and shopping budgets.
Last week, Morrisons launched a campaign to tell customers it offers the same or cheaper prices than discounters Aldi and Lidl, echoing similar marketing drives by Tesco, Asda and Sainsbury’s.
Overall, shop price inflation eased to 2.5% in February, from 2.9% in January. Nonfood prices rose, up 1.3% on a year earlier and 0.7% on January.
Richard Walker, the executive chair of frozen food chain Iceland, said a cost squeeze in its supply chain had eased and it had seen “strong sales” after cutting prices, including on pizzas, beef burgers and ready meals.
“Cost pressures throughout manufacturing are coming down and this is starting to come through,” Walker said. “We are passing on the biggest falls faster than wholesale prices are coming down for us to get ahead of the game. For our customers, offering great value is more important than ever.”
The BRC figures showed the price of furniture, electricals, and health and beauty products rose, but clothing fell as retailers attempted to lure shoppers with promotions.
Dickinson said that easing inflation was “good news” for shoppers, but warned that the increase in shipping costs due to disruption in the Red Sea could push up the cost of non-food items, and reiterated calls for government help on retailers’ business rates bills ahead of next month’s budget.
Separate data from the CBI showed retail sales in the year to February fell at a modest pace after a sharp drop last month. Its quarterly survey predicted the rate at which sales would fall will accelerate next month.
