As Morrisons opens up a new price battle among the grocers, prices have fallen by the largest year-on-year proportion on record.
The Grocer Price Index, collated by BrandView from more than 60,000 SKUs across the big four, recorded the most intense market deflation to date at -2.84% year on year in the month to 1 February.
The previous GPI deflationary record was -2.53%, recorded in the month to 1 May 2015. The index has now recorded a negative figure for every month since the month to 1 June 2014.
The prime mover in this price cutting has been Morrisons, which saw its prices drop by 5.2% year on year, the highest single-month fall recorded by any supermarket since deflation bit in mid-2014.
This month’s GPI figures incorporate the 1,072 lines Morrisons cut prices on at the beginning of the week, with a focus on fresh produce.
Morrisons’ dairy category recorded annual deflation of 10.5%, but offers saw household goods fall 13.4% year on year and health and beauty by 6.8%.
All four retailers have cut prices year on year, with Tesco down by 3.4%, Sainsbury’s by 2.2% and Asda by 1.4%. Waitrose, which is not included in the overall GPI figure, saw prices fall by 0.6%.
Every category saw annual deflation once more with alcohol (-3.3%) and bakery (-3.6%) joining the Morrisons-driven household (-4%) and dairy (-3.8%) as the biggest fallers.
The overall drop in the GPI figure was underpinned by a smaller post-Christmas price increase so far in 2016 than was seen in 2015.
Prices rose 1.1% in the month to 1 February 2015 compared with the month to 1 January 2015, but were only up 0.1% month on month this year.
On a month-on-month basis, the biggest category mover was soft drinks with a 2.5% price rise. Frozen prices rose by 2.2%, but there was a 2.3% fall in the price of chilled and deli goods.
Though GPI and other reports suggest there is modest month-on-month food inflation, there is little prospect of annual deflation easing significantly any time soon. During January the price of Brent crude oil, which has underpinned a large fall in commodity prices, dropped below $30 a barrel for the first time in 12 years.
However, Ocado CEO Tim Steiner this week said the “perfect storm” of deflation - driven by plunging oil prices, the Russian import ban, a Chinese consumer slowdown and the pressure on conventional supermarkets over falling sales - was showing signs of bottoming out.
“I don’t see the pressure letting off for the moment, but it may not get much worse,” he said. “I don’t think that energy and commodity prices will go much lower and the focus on supermarkets will start to shift from like for like sales to cashflow generation.”