Festive bargain-hunters got an early present as supermarket deflation accelerated to its highest level to date in the run-up to Christmas.
With the big four heavily discounting to secure precious Christmas trade, the average level of deflation went further out to -1.31% in the month to 1 January, according the The Grocer Price Index.
The record rate of deflation at Christmas was driven by year-on-year price cuts across all of the big four supermarkets .
The previous highest measure of deflation recorded by the GPI, which is compiled by BrandView and tracks the price of 60,000 grocery products across the big four, was -1.24% in the month to 1 November. The rate of annual deflation stood at -1.17% in the month to 1 December.
Sainsbury ’s recorded the highest annual rate of deflation, with prices 1.87% lower than during the corresponding period in 2013 and the supermarket’s highest level of deflation recorded in 2014.
The other major multiples told a similar story – all recording lower prices but at a level of deflation down from their 2014 peaks. Tesco was the best of the rest, experiencing price deflation of 1.36%, while Morrisons and Asda recorded -1.00% and -0.73% respectively.
Sainsbury’s month-on-month deflation stood at -1.22%, which was actually less than month-on-month price reductions at Morrisons (-16.3%) suggesting Sainsbury’s had higher base prices in December 2013 to create a more gentle year-on-year comparative period.
The drop in average prices at Sainsbury’s over the past year was primarily attributable to a significant drop in dairy prices (-4.99%), soft drinks (-4.27%) and fruit and veg (-4%).
Overall GPI fruit and veg prices fell by 3.2% and significant deflation was seen across the big four in soft drinks (-2.96%), bakery (-2.07%) and deli (-1.97%). All four major supermarkets saw deflation in fruit and veg, though Morrisons recorded the highest falls at -5.73%. The picture for dairy was more mixed in the run-up to Christmas, with Tesco and Asda seeing annual price inflation (1.42% and 1.05% respectively).
Month-on-month price cuts were most pronounced in the alcoholic drinks category (-0.96% compared with the month to 1 December) as the supermarkets discounted beers , wines and spirits for thirsty shoppers during the festive season.
Once again, baby goods was one of the only categories to see annual price inflation – with prices across the big four rising 2.65% year-on-year.
The overall figures would seem to lend credence to Sainsbury’s CEO Mike Coupe’s contention that the supermarket’s prices “have never been sharper” and his vow to fight “toe-to-toe” on price after Sainsbury’s encouraging Christmas trading update.
As Sainsbury’s released its third quarter trading update earlier this month, the supermarket promised a £150m investment to lower prices on 1,000 products. Earlier in the same week Asda committed £300m to cut prices.