UK grocery inflation falls to lowest in nearly 3 years

GROCERY price inflation fell to its lowest level since September 2021 in a further sign of easing cost pressures, ahead of a crucial decision by the Bank of England (BOE) next month on whether to cut interest rates.

The annual pace of UK supermarket price increases dropped to 1.6 per cent in the four weeks to Jul 7 from a year earlier, down from 2.1 per cent last month, data published by research firm showed on Tuesday (Jul 16).

The UK’s official rate of inflation will be updated on Wednesday, with economists expecting the consumer prices index to remain around the BOE’s 2 per cent target.

The central bank will decide on Aug 1 whether to cut interest rates for the first time since the start of the pandemic.

Shoppers have pared back their spending since grocery price inflation hit 17 per cent in March 2023, opting instead for value through deals and discounts.

However, there are signs this is changing, with consumers making 2 per cent more trips to the supermarket from a year ago – the largest monthly rise in 2024.

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Sales of branded products also increased at a faster pace than that of private-label items.

Ocado Group was the fastest-growing grocer for the fifth consecutive month, with sales rising nearly 11 per cent over the 12 weeks to Jul 7.

The online business has been winning over customers with price cuts and special offers, now giving it a 1.8 per cent share of the market.

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Meanwhile, Tesco expanded its market share the most in more than two years. The retailer’s sales rose 4.6 per cent in the 12 weeks to Jul 7, from a year ago.

It now holds 27.7 per cent of the market, above J Sainsbury at 15.3 per cent. BLOOMBERG