Falling commodity costs and a fierce price war driven by sluggish autumn sales have helped take supermarket price inflation below 2% for the first time in years this month.
Average inflation across the big four dropped from 2.37% on 1 October to 1.89% on 1 November, aided downwards by a sharp fall in the price of several key commodities in recent months.
A better harvest in the UK and good harvests in Europe and North America have depressed wheat and other grain prices, while UK sugar prices have also fallen. These have fed through into lower retail prices. For example, in bakery, prices have fallen 1% since the start of the year, having risen steeply in late 2012 on the back of one of the worst harvests in decades.
“We’re not seeing any upward pressure on pricing,” said John Bason, finance director of ABF. “In some categories, not least bread, prices have come down. There is a lot more promo activity - it is increasingly common to see loaves from leading brands on promotion for £1.”
In other categories, like household and health & beauty, fierce competition between brands and more promotional events at the supermarkets have put downward pressure on prices. Health & beauty prices have fallen 2% over the past year and household prices are unchanged year-on-year. Last month, household and personal care supplier McBride blamed a disappointing 1% increase in quarterly own-label sales on intense promo activity by the supermarkets.
The only categories to show inflation of 3% or more are dairy, fruit & veg and meat, poultry & fish. Last year’s long, cold winter in the UK hampered milk production and affected some fruit & veg crops. As a result, prices in both categories are up a fraction over 3%.
But the biggest inflation hotspot is meat, fish & poultry, where prices are 6% higher year-on-year. In the wake of the horsemeat scandal, retailers have increased demand for UK meat, which has put pressure on supply and driven up prices.
At 1.4% Sainsbury’s has the lowest inflation of the big four. And although inflation is highest at Asda, at 2%, it has kept the tightest lid on it over the past five years. The chain has also just cut prices 1.4% month-on-month, running festive booze promos - cutting prices 4.5% month-on-month to entice shoppers - earlier than rivals.
Inflation at Waitrose is higher than its larger rivals, at 2.6%. After cutting prices last month, the chain put them up 0.8% month-on-month, with the biggest price increases on alcohol, household and health & beauty.
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