UK grocery price inflation slows as retailers launch pre-Christmas promotions

The pace of grocery inflation in Britain slowed last month as retailers ramped up promotions before Christmas, providing a little relief for consumers bracing for further tax rises in this month’s budget.

Grocery inflation stood at 4.7% in the four weeks to 2 November, easing from 5.2% in the previous four weeks, according to figures from Worldpanel by Numerator, formerly known as Kantar.

Official data published last month showed overall UK inflation held steady at 3.8% in September, with food inflation slowing. The next official figures are due on 19 November, shortly before the chancellor, Rachel Reeves, presents her budget on 26 November.

Worldpanel said prices were rising fastest on chocolate confectionery, fresh meat and coffee and were falling fastest on kitchen roll and toilet paper, sugar confectionery and dog food.

It said grocery sales grew 3.2% year on year over the four-week period – with spending on deals rising 9.4% compared with an increase of 1.8% on full-priced goods.

The figures, which show spending growth lagging behind the rate of grocery price inflation, suggest that households are buying fewer items or switching to cheaper options, including supermarket own label alternatives and discounters, in order to save money.

The discount chain Lidl was by far the fastest growing of the grocers with physical stores. Its sales rose 10.8% in the 12 weeks to 2 November as it benefited from the hunt for better value and new store openings. Tesco and Sainsbury’s, the UK’s two biggest supermarket chains, also continued to gain market share, while Asda continued to struggle, with sales down 3.9%.

Asda’s market share slipped one percentage point to 11.6%, while Morrisons is within a whisker – 0.1 percentage points – of being overtaken by Lidl as the UK’s fifth largest supermarket as the Bradford-based chain’s sales rose by just 2.3%.

However, the rise in disposable income for higher earners benefited the upmarket grocers Marks & Spencer and Ocado, with sales rising 8.8% and 15.9% in the 12 weeks.

Shares in the UK stock market-listed retailers Tesco, Sainsbury’s and M&S fell on Tuesday. Freddie Wild, an analyst at Jefferies, suggested the slowdown in growth could be “the new normal”.

Analysts at Citi said Sainsbury’s and Tesco’s “performance relative to the discounters worsened” and suggested there was a risk that a worsening macro economic environment could further drive shoppers to seek out bargains at the likes of Aldi and Lidl.

Fraser McKevitt, the head of retail and consumer insight at Worldpanel, said: “Christmas ads are hitting our screens and the race to the big day is on in the supermarket sector. Retailers are very alive to the financial struggles that some households are facing, not least ahead of this year’s budget.

“They’re eager to show how they’re offering shoppers value for money, putting the emphasis on price cuts rather than multibuy offers.

“It’s not just the Grinch who’s looking for savings, with just shy of 30% of consumer spending at the grocers on promoted items in October, a figure that we expect to go even higher as we get closer to Christmas.”

Reuters contributed to this report