Prices in the chilled aisles are continuing to drive inflation in the supermarkets, but far from being a runaway train, overall grocery inflation has eased for the second consecutive month.
While the UK’s headline consumer price index (CPI) measure of inflation was up to 2.7% in April, inflation in grocery, as measured by The Grocer Price Index - collated by Brand View from more than 60,000 supermarket SKUs - stood at 0.9% in the month to 1 June - down from the 1.1% rate recorded to 1 May and the 1.4% to 1 April.
That said this still marks the fourth consecutive month of rising grocery prices year on year, after almost three years of deflation, which peaked 12 months ago at -3.1% in the year to 1 June 2016.
The chilled category saw the highest level of annual price inflation, up to 2.6% from 2.4% in the month to 1 May, while dairy rose to 1.9% from 1.2% last month and meat, fish & poultry edged up to 2.1%.
However, four categories saw annual prices fall this month, compared with two last month. Deli and soft drinks remained in deflation at -1.6% and -1.1% respectively and were joined by household goods (-0.4%) and fruit & veg (-0.5% after being at +0.7% last month). Fruit & veg prices fell for the first time since the month to 1 February.
At 0.3%, inflation was lowest at Asda (down from 1.2% last month), overtaking last month’s price leader Tesco, whose prices rose 0.9% in the period. This month marks the first time Asda has led the big four on annual price movement since the month to 1 November 2016.
Morrisons had the highest level of inflation at 1.3% among the big four, with Sainsbury’s at 1.1%. Waitrose, not included in the GPI figure, put its prices up by 1.7% versus 1% last month.
Asda’s GPI index score – its overall measure of price that was set at 100 in September 2008 – is also the lowest of the big four and has been for all but three months of the past 12 when Morrisons edged below.
The easing of the overall inflationary trend would seem to be a mixture of supermarket pricing action to minimise the gap versus the hard discounters, the slight but sustained rise in the value of the pound and the annualising of grocery deflation.
Prices are rising compared with last year, but still remain 2.2% down on a two-year basis and 3.8% down compared with the month of 1 June 2014.
Therefore there is still plenty of scope for prices to rise back towards their pre-price war levels. Plus, the impact of the plunge in the pound on shelf prices only slowly became material through the latter half of 2016, with the GPI actually hitting its lowest post-price war index score in the month to 1 December.
Expectations of a bigger majority for Theresa May and the Conservative Party - and therefore a potentially stronger Brexit negotiating position - helped the pound recover to $1.29 in recent weeks from $1.22 in March, though the pound has weakened against the euro in recent weeks and a report by HSBC last week predicted the pound would reach parity by the end of 2017.