Food prices are still soaring according to influential industry numbers out today, but the overall rate of inflation is continuing to ease into tomorrow’s crucial reading of the consumer price index.
Kantar revealed that grocery price inflation was at 14.9%, a level the market research and analytics group described as “incredibly high”.
But it pointed out that it was down for the fourth consecutive month in the four weeks to July 9, dropping by 1.6 percentage points, in a sustained move away from March’s peak at 17.5%.
The direction of travel will make welcome reading at the Bank of England, which is locked in a bitter fight to tame inflation back toward its 2% target and has taken rates to 5%. But the scale of the problems it faces remain clear from grocery price inflation stuck in the mid-teens.
It meant that hard-pressed households faced a rise of £330 in the average annual household grocery bill, which would have been even higher without price-cutting loyalty cards at supermarkets, which helped to slow the overall rise. Without price promotions, the rise would have been £683, Kantar said.
Sales of discounted items were up for the first time in two years, covering over a quarter of spending in the period, as customers dealing with the cost-of-living crisis were on watch for promotions.
Fraser McKevitt, head of retail and consumer insight at Kantar said: “loyalty card deals like Tesco’s Clubcard Prices and Sainsbury’s Nectar Prices” were being “ramped up”, adding: “This could signal a change in focus by the grocers who had been concentrating their efforts on everyday low pricing, particularly by offering more value own-label lines.”
There were also seasonal factors. With the Wimbledon tennis underway, sales of strawberries and fresh cream up 16% and 13% respectively. Hay fever remedies were in demand, with sales up 16%.
With the City braced for the full consumer price index tomorrow, Kantar revealed that , overall take-home grocery sales were up 10.4%, which could catch the eye of the BOE’s Monetary Policy Committee.
Tomorrow’s CPI numbers will be a major influence on its next call on rates, due in August, and at which it is widely expected to vote for a hike, taking the base cost of borrowing up to either 5.25% or even 5.50%.
It would be the fourteenth consecutive rise, coming at a time when the BOE’s own figures show that one million homeowners face monthly cost increases of £500 by 2026, with payments up £220 a month by the end of this year.
Michael Hewson at CMC Markets said: “This week’s [CPI] numbers probably won’t alter the calculus around a quarter-point rate hike by the Bank of England, however a strong number could increase the pressure to go bigger and hike by a half-point, which for now looks the most likely outcome.”
