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Food prices are finally heading higher in the ambient goods category after two years of deflation in the market, the latest Grocer Price Index has found.

The dry grocery category saw prices nudge up 0.2% year on year in the month to 1 October after 17 consecutive months of declining prices.

It’s the only category in the 14 tracked by the GPI to show higher yearly prices. And it is a significant move given that there are more than 14,000 SKUs on shelves.

Tesco was the main driver of the ambient inflation, with dry grocery prices rising 3.6% in the month while prices at its big four rivals kept falling.

Tesco CEO Dave Lewis this week said deflation was likely to persist for the foreseeable future despite the weakening pound and rising commodity costs.

“We still see some deflation in the marketplace and we think we will continue to face that reality, certainly into the short term,” he added.

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Morning Update

Also on thegrocer.co.uk this morning, the losses at Netto which led to Sainsbury’s walking away from the joint venture have been uncovered by The Grocer. Newly filed accounts revealed Netto Ltd’s loss before taxation rose from £7.2m in 2014 to £39.9m in the year to 31 December 2015 on sales that rose from £2m to £23m in its first full year of operation. Read the full story here.

It’s a quiet end to the week with no newsflow on the London Stock Exchange.

The FTSE 100 is up 0.4% this morning to get back above 7,000 points after slipping yesterday.

Early risers include Unilever (ULVR), up 0.9% to 3,727.5p, PZ Cussons (PZC), up 0.7% to 365.5p, and Booker (BOK), up 0.6% to 181.1p.

Tesco, Morrisons, Sainsbury’s and Ocado all continued yesterday’s downward trend, falling 0.4% to 201.1p, 0.6% to 219.9p, 2% to 240p and 0.7% to 259.7p respectively.

Yesterday in the City

After a near 10% jump on Wednesday, enthusiasm for Tesco (TSCO) softened a bit yesterday. The City has flocked to buy shares after CEO Dave Lewis confidently declared his recovery plan would boost margins to up to 4% in three years. The stock sank back 2.5% to 201.9p yesterday.

Sainsbury’s (SBRY) and Morrisons (MRW), which also made gains on the back of optimism at Tesco, fell back 1.3% to 245.1p and 0.7% to 221.5p respectively.

Ocado (OCDO) was also down 1.2% to 261.9p, as was Marks & Spencer (MKS), down 2.2% to 330.3p.

There was no grocery market news to speak of yesterday to drive values, but the FTSE 100 slipped 0.5% to below 7,000 points.

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