British Shoppers Enjoy Lower Food Prices as Retail Inflation Drops
In a surprising turn of events, British shoppers experienced a decline in food prices last month, marking the first monthly fall since July 2021. According to the British Retail Consortium (BRC), the average food basket recorded a decrease of 0.1% between August and September. This decline contributed to an overall drop in retail inflation, which now stands at 6.2%, the lowest it has been in a year.
This news comes as a welcome relief for consumers, particularly those who regularly purchase dairy products, margarine, fish, and vegetables, as these were the items that caused the overall decrease in prices. The BRC’s findings appear to validate the decision made by the Bank of England last month to maintain interest rates at 5.25% after 14 consecutive hikes. Should the official inflation figures, set to be released next week, align with the BRC’s data, the central bank’s decision will likely be further justified.
However, while consumers bask in the joy of lower food prices, grocers find themselves in a more challenging position. Helen Dickinson, the CEO of the BRC, attributed the decline in prices to “fierce competition” among retailers. This increased competition has already begun to impact grocers, with J Sainsbury’s expected to see a decrease in its EBITDA margin from 6.9% in the 12 months ending March 2023 to 6.7% in its current financial year, according to forecasts from the London Stock Exchange Group.
For grocers, who are already grappling with various challenges, a price war to attract cash-strapped consumers is the last thing they need. The pressure to remain competitive and retain market share is becoming increasingly intense, and the decline in food prices only adds to the strain.
Overall, the recent decline in food prices in the UK brings positive news for consumers, offering a reprieve from rising costs. However, it presents fresh challenges for grocers who are already navigating a difficult landscape. As the official inflation figures are set to be released next week, all eyes will be on whether the BRC’s findings are confirmed, and the impact this will have on the Bank of England’s future decisions.
More detail via Reuters here… ( Image via Reuters )