Rising prices for vitamins, fruit juice and chocolate has pushed up grocery prices inflation for the first time in more than a year, with sales of cough lozenges sharply up as Britain battled to keep Covid at bay while enjoying a busy summer of sport.
Figures from Kantar, the research provider, show that grocery inflation rose to 1.8 per cent on an annual basis in August, from 1.6 per cent in the previous month, the first rise since March 2023. Shop prices were measured in the four weeks to August 4.
Shoppers watched the start of the Olympic Games over drinks and snacks, with sales of wine up by 35 per cent, nuts rising by 60 per cent and crisps up 10 per cent on the Friday of the Games’ opening ceremony in Paris.
England football fans were also determined to enjoy themselves when the team reached the final of Euro 24, with £10 million spent on beer on the day of the final. Sales of burgers rose by 32 per cent compared with the same time last year, while the amount spent on ice cream was 23 per cent higher.
A resurgence of Covid and summer cold viruses was likely to be behind a 28 per cent rise in sales of cough lozenges. There was some relief for shoppers as grocery inflation was curtailed by low prices growth for toilet paper, bottled colas and dog food.
The rise in grocery prices underscores the difficulties faced by the Bank of England in keeping inflation at its target in the coming months. It is thought that the consumer prices index, Britain’s official inflation measure, has inched up for the first time this year. Analysts think that the Office for National Statistics will say this week that CPI inflation rose to 2.3 per cent in July, from 2 per cent in the previous two months. The Bank of England’s overall target is 2 per cent.
Inflation reached a four-decade high in 2022 of 11.1 per cent, driven by sharp increases in food and energy prices. Poorer households have suffered the most during the cost of living crisis as they spend a greater share of their income on basic necessities.
“Having reached its lowest rate in almost three years in July, August saw inflation nudge up again slightly,” Fraser McKevitt, head of retail and consumer insight at Kantar, said. “While this is noticeable following 17 straight months of falling rates, it actually marks a return to the average levels seen in the five years before the start of the cost of living crisis.”
Inflation is expected to rise again in the second half of this year owing to unfavourable comparisons with energy prices inflation in the previous year. Wages growth, although now down to the lowest level in about two years at 5.4 per cent, is set to keep services inflation high.
A reignition of inflation is unlikely to deter the Bank from lowering interest rates further this year, according to investors, who expect two more quarter-point cuts in 2024.
The Bank’s monetary policy committee, the nine-strong body that sets the level of interest rates, narrowly voted 5-4 this month in favour of cutting the base rate to 5 per cent, the first reduction since March 2020.
Kantar also provided a snapshot of Britain’s grocery sector, estimating that Tesco had retained its position as the country’s largest supermarket with a market share of 27.6 per cent, up by 0.6 percentage points over the past year. Sainsbury’s followed with a share of 15.3 per cent, up by 0.5 percentage points. Asda came third with a share of 12.6 per cent, down from 13.7 per cent in the previous year.
“Discounters Lidl and Aldi both saw sales growth,” Kantar said. “Buoyed by a 7.8 per cent boost in sales, Lidl won an extra 0.4 percentage points of the market, taking its share to 8.1 per cent. Aldi’s market share is now 10 per cent.”