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Amidst tumbling energy costs and a fierce price war among supermarkets, food price inflation in the UK has reached its lowest level in almost two years, offering a respite to households grappling with stretched budgets.
According to the British Retail Consortium (BRC) shop price index, the cost of meat, fish, and fruit experienced a dip in February, resulting in a 5% increase in food prices compared to the previous year. This marks a notable decline from January’s 6.1% and represents the lowest inflation rate since May 2022.
While food prices continue to rise, the rate of increase has significantly slowed, providing relief to consumers who have been grappling with double-digit inflation fueled by rising energy prices in recent years.
Helen Dickinson, Chief Executive of the BRC, attributed the easing of food price inflation to decreasing input costs for energy and fertilizers, coupled with intense competition among retailers to keep prices down.
The recent plunge in wholesale gas prices has also translated into lower household energy bills, with Ofgem announcing a 12% reduction in the price cap, providing further relief to consumers.
Simultaneously, major supermarkets have intensified efforts to compete on price, with Morrisons leading a campaign to highlight comparable or cheaper prices than discounters Aldi and Lidl. Other retail giants like Tesco, Asda, and Sainsbury’s have followed suit, engaging in aggressive marketing drives.
Overall shop price inflation saw a dip to 2.5% in February from 2.9% in January, with non-food prices experiencing a modest increase of 1.3% compared to the previous year.
Richard Walker, Executive Chair of frozen food chain Iceland, noted a relaxation of cost pressures in the supply chain, leading to strong sales after implementing price cuts on various products. He emphasized the importance of offering value to customers amidst challenging economic conditions.
While easing inflation bodes well for shoppers, concerns remain regarding potential cost pressures on non-food items due to disruptions in shipping routes, particularly in the Red Sea. Helen Dickinson reiterated calls for government assistance on retailers’ business rates bills ahead of the upcoming budget, underscoring the need for continued support amid ongoing economic uncertainties.
Separate data from the CBI revealed a modest decline in retail sales in February following a sharp drop the previous month, with forecasts suggesting a further acceleration in the rate of sales decline in the coming months.