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UK grocery inflation fell to near its historical average in May, bringing some relief to consumers hit by the cost of living crisis since 2021, according to sector data.
Grocery price annual inflation dropped to 2.4 per cent in the four weeks to mid-May, down from 3.2 per cent last month and the lowest since October 2021, research company Kantar said on Tuesday.
The figure was also only 0.8 percentage points higher than the average of 1.6 per cent in the 10 years to 2021, which is just before prices began to climb.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Grocery price inflation is gradually returning to what we would consider more normal levels.”
The figures come ahead of official inflation data for April to be published on Wednesday. Economists polled by Reuters expect headline price growth eased to 2.1 per cent in April, just a touch higher than the Bank of England’s 2 per cent target and down from the 3.2 per cent in March.
April’s fall in the official measure of inflation is expected to be driven by lower energy bills. However, Kantar data suggests that food inflation also continued its decline from a 45-year high of 19.2 per cent in March 2023.
A widespread decline in price pressure, particularly in services, could cement expectations that the BoE will start to cut interest rates from their 16-year high of 5.25 per cent in June, a move which markets are pricing with a 53 per cent probability.
Food and energy costs soared following Russia’s invasion of Ukraine, hitting the poorest households the hardest, but Kantar data suggests the impact has largely waned. Lower inflation could support consumer spending as real wages continue to expand at a steady pace.
Spending growth would help the economy continue its recovery from last year’s recession. In the first three months, the economy grew more than expected and at the fastest pace since 2021, prompting some economists to revise up their forecasts for this year.
McKevitt said that even if grocery inflation had fallen to more manageable levels, “after nearly two and a half years of rapidly rising prices, it could take a bit longer for shoppers to unwind the habits they have learnt to help them manage the cost of living crisis”.
Supermarkets’ own-label lines are proving resilient, he explained, as they were still growing faster than branded equivalents, making up over half of total spending. The discount store Lidl reached a record-high market share of 8.1 per cent, fuelled by sales growth of 9.4 per cent, nearly three times the rate of the grocery sector overall.
McKevitt said it “seems that many barbecues were given their first outings of the year” during the bank holiday weekend of May 4-6, with burger sales up by 13 per cent over the previous weekend, while beer and wine sales rose 9 per cent and 21 per cent respectively.
