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Grocery price inflation has fallen to its lowest level in more than a year as it dropped for the sixth month in a row, the latest data shows.
The measure of inflation in supermarket food products dropped to 12.2% for the four weeks to 3 September, according to data from Kantar.
However, 95% of consumers are still worried about the impact of rising grocery prices, Kantar says, which is matched only by their concern about energy bills.
“After a full year of double-digit grocery inflation, it’s no surprise that just under a quarter of the population consider themselves to be struggling financially – although this is a very slight drop compared to May,” says Fraser McKevitt, head of retail and consumer insight at Kantar’s Worldpanel Division, UK.
Consumers aren’t the only ones still feeling the bite of inflation. The Federation of Small Businesses (FSB) has warned that the recent drop in overall inflation isn’t enough to calm small business owners. “Any reduction in inflation is good news, but the huge toll that spiralling prices have inflicted is still being keenly felt by small firms,” says Martin McTague, national chair of the FSB.
“Despite the inflationary pressures that we’ve seen for more than a year, more small businesses have seen their revenues shrink over each of the last five quarters than have seen them increase, according to our research.”
In the run up to the all-important festive season, the FSB has come up with a list of asks it hopes the government will take on board to boost small retailers and hospitality businesses. The list includes increasing the Small Business Rates Relief threshold and the VAT threshold, guaranteeing cheaper energy costs and more.
“Taking steps to ease the cost of doing business on small firms would in turn ease prices as people across the country start Christmas shopping or planning a work party,” Martin says.
Kantar’s Fraser predicts that UK grocery inflation will remain “stubbornly high”, and during this time, discount retailers will continue to take up more of the market. “Between them, the discounters now capture 17.7% of the sector,” Fraser says.
However, it isn’t only discounters who are experiencing growth.
Waitrose’s growth accelerated to 5.6% over the period, meaning that the retailer now holds 4.6% of the market, and Ocado also saw sales increasing faster than last month, with growth now at 4.3% and market share at 1.6%.
Seeing more premium supermarkets gaining ground shows that quality food still has a place on consumers’ shelves in the cost-of-living crisis.
Indeed, the latest data from the British Retail Consortium (BRC) showed that food sales increased 8.2% over the three months to August, though inflation remains a dominant driver of growth.
“Despite the disappointing summer weather, August saw food and drink sales recovering some momentum that was lost in July,” says Sarah Bradbury, CEO of IGD.
And Andrew Goodacre, CEO of the British Independent Retailers Association (Bira), points to more good news for small businesses: “It was positive to see the continued decline of internet sales, suggesting that people want to buy in shops and support their local community. This is another reason for supporting the high street businesses that are so integral to local communities.”