New data from Kantar Worldpanel, a leading industry tracker, has revealed that grocery inflation in the UK has reached its lowest level since October 2021. This news comes ahead of the official release of inflation figures, which are expected to show a significant decrease in the overall pace of price increases in the economy.
According to Kantar’s report, grocery inflation slowed to 2.4% in the four weeks leading up to May 12th, down from 3.2% in the previous month. While there is still upward pressure on the cost of certain items such as chilled fruit juices, drinks, sugar confectionery, and chocolate confectionery, prices have been falling for items like toilet tissues, butter, and milk.
Fraser McKevitt, Kantar’s head of retail and consumer insight, stated that grocery price inflation is gradually returning to more normal levels, with a current rate of only 0.8 percentage points higher than the 10-year average. McKevitt also noted that an inflation rate of around 3% typically leads to changes in consumer behavior, with shoppers opting for cheaper items when the rate goes above this line. However, after nearly two and a half years of rapidly rising prices, it may take longer for shoppers to adjust their spending habits.
The rising cost of a weekly shop has been a major factor in the squeeze on shoppers’ budgets since the start of the COVID-19 pandemic. While the bulk of grocery inflation has been driven by the surge in energy and commodity prices following Russia’s invasion of Ukraine, it has been gradually easing for the past 15 months.
There are potential risks ahead, such as the cost of imported fresh food from the European Union becoming more expensive due to additional Brexit red tape at border checks. However, these are not expected to have a significant impact on the headline measure of inflation in the coming months.
Economists predict that the consumer prices index (CPI) rate will slow to 2% or lower over the 12 months leading up to April, when the Office for National Statistics (ONS) releases the latest inflation data on Wednesday morning. This aligns with the Bank of England’s inflation target of 2%, leading to speculation that interest rates could be cut in the near future.
Financial markets currently indicate a 58% chance of the Bank rate falling from 5.25% to 5% at the next meeting of the Monetary Policy Committee (MPC) in June. Some members of the MPC, including Bank governor Andrew Bailey, have suggested a potential cut in the summer, but decisions will be based on the latest data leading up to the meeting.
