Monthly price growth was 1.1%, a slight decrease on the 1.4% seen in August and well down on July’s sharp 4.3% jump in prices.
Annual food price inflation was 16.5%, with the biggest rise, 21.1%, witnessed in the meat, fish and poultry category, while soft drink prices actually fell 2.3% year-on-year.
While prices are still growing, the slowdown in monthly inflation suggests a peak, or at least a plateau, is imminent.
Things have gone a little further at Asda, which was the only retailer to see a drop in prices this month. But before too much is made of Asda’s falling prices, it’s worth looking at Morrisons’ recent history in the GPI. In June its prices fell 0.9%, and in July it kept its price increases well below those of the other major multiples.
But Morrisons’ prices have since increased above the average GPI rate, and its price growth (though not necessarily its prices) have caught up with Tesco this month. Morrisons seems to have taken the view initially that it could absorb more of the impact of rising costs than its rivals, but has eventually been forced to pass these costs on.
Whether Asda’s current price deflation is a similar blip in an upwards trend ultimately depends on these input prices. If food commodity prices slacken, then the peak is upon us.
Falling prices could be one of the few upsides of recession.
This week saw the effects of the credit crisis begin to spill into the real economy as commodity prices tumbled. At the time of writing, oil prices had fallen 7.4% during the week after a 10.2% fall last week. Oil prices are now just 6.4% higher than this time last year – a huge drop off from peak prices.
Food commodities may not have seen the sharp recent drops of metals or fuels, but more than 12 months on from last year’s poor harvests, year-on-year price growth is stabilising and some prices, notably wheat, are beginning to drop off. Lower oil prices will also eventually impact on food prices.
However, suppliers have warned the industry not to expect prices to fall too soon.
Northern Foods chief financial officer Jez Maiden said: “Clearly inflation is peaking in the sense that last year’s harvests, which came as a big shock, have had their impact. But we believe higher prices are here to stay.”
Maiden also warned that falls in commodity prices would take longer to filter through than people expected, due to pricing deals made to stabilise companies’ costs. Companies are often also paying more for financing facilities, which could also mitigate any cuts.
The signs all suggest the price rises of the past year are coming to an end. But those hoping for prices to drop back to their 2006 levels may have a long time to wait.