INFLATION in UK stores dropped to its lowest level in more than two years as supermarkets compete to lure shoppers with low prices.

The rate of price rises slowed to 1.3 per cent last month, sharply down from 2.5 per cent in February, the British Retail Consortium (BRC) said on Tuesday (Apr 2). The figure was its lowest since December 2021, before inflation rocketed into double-digit territory when Russia invaded Ukraine.

Food price inflation eased for the 10th month in a row to 3.7 per cent – its lowest since April 2022 – as grocers fight to stem the flow of customers to discount rivals through price matching. That was down from a 5 per cent rise the month before.

The findings, which cover Mar 1 to 7, offer encouraging signs that headline inflation is slowing and raise hopes for interest rate cuts. The Bank of England held rates at a 16-year high last month, with governor Andrew Bailey saying there’s “still some way to go” on easing underlying pressures.

“While these figures are good news for consumers, from this month, retailers face significant increased cost pressures that could put progress on bringing down inflation at risk,” said Helen Dickinson, chief executive officer of the BRC, citing increases in property tax and the minimum wage.

Higher food prices – a significant driver of inflation – have prompted even affluent shoppers to switch to cheaper grocers such as Aldi and Lidl. Upmarket rivals, including Waitrose and Marks & Spencer, have cut prices to avoid losing ground.

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Grocers will also have to contend with higher chocolate and sugar prices. Poor weather and crop disease in West Africa – a major grower of the world’s cocoa – have sent cocoa futures to a record high of US$10,000 a tonne as chocolate makers rush to secure supplies against the prospect of volume losses bleeding into next year. BLOOMBERG