Grocery price inflation falls for fifth month in a row, retail data suggests
Grocery price inflation has eased for the fifth month in a row – as the cost of some staples come down.
Closely watched data from Kantar Worldpanel, which tracks supermarket sales and bills, found that while the expense of a food shop is still higher than last year, the pace of price rises has been slowing down this summer.
Its researchers reported a grocery price inflation rate of 12.7% in the four weeks to 6 August – a 2.2 percentage point drop from the month before.
Kantar said a fall in the cost of some staples was a factor. It said shoppers paid £1.50 for four pints of milk last month, down from £1.69 in March.
The average cost of a litre of sunflower oil is now said to be £2.19 – 22 pence less than in the spring.
Kantar’s head of retail and consumer insight, Fraser McKevitt, said: “The latest slowdown in price rises is the second sharpest monthly fall since we started monitoring grocery inflation in this way back in 2008.
“Prices are still up year on year across every supermarket shelf, but consumers will have been relieved to see the cost of some staple goods starting to edge down compared with earlier in 2023.”
He said the average increase in households’ weekly grocery shop is £5.13, when compared with last year.
Researchers also found that the recent wet weather across much of the UK had an impact on supermarkets’ figures in July.
Sales of ice cream and Halloumi were down around 30% – while purchases of soft drinks fell by nearly a fifth.
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However sales of soup – traditionally seen as a winter warmer product – were up 16% year-on-year.
Kantar said the gloomy weather was also likely to have contributed to a drop in footfall, which was down for the first time in 18 months as people made 320,000 fewer trips to supermarkets compared to a year ago.
Overall take-home grocery sales rose by 6.5% in the four weeks to 6 August, down from 10.4% in the previous period.
But researchers said other supermarkets may soon benefit from the collapse of Wilko, which went into administration last week.
The chain’s 400 stores remain open – for now – but its long-term future is in doubt.
“Wilko is a popular choice for many shoppers with 7.6 million households visiting its stores to buy groceries in the last year,” said Mr McKevitt.
He added: “Wilko’s rivals will be keeping a close eye on its fortunes in the coming days and weeks as they look to draw some of its shoppers through their doors.”
Kantar’s research comes ahead of new official inflation figures, which are due to be released by the Office for National Statistics on Wednesday morning.
Last month it reported a bigger-than-expected drop in the rate to 7.9% in the year up to June.
The Bank of England then decided to raise interest rates for the 14th time in a row to 5.25% as part of attempts to bring inflation back down to its target of 2%.
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Economy more ‘resilient’ than expected
Inflation is expected to fall again this week, although experts believe it is unlikely the Bank will achieve its target this year.
The Bank of England’s chief economist, Huw Pill, also said last week that food prices may never fall back to the level they were before the war in Ukraine began.
Separate figures from the British Retail Consortium (BRC) earlier this month also suggested food price inflation has been falling in recent months, with the cost of some staples coming down.
But it warned the trend may not continue smoothly this year because there were “dark clouds on the horizon”.
The BRC said this included the potential impact on prices of Russia’s decision to pull out of a deal to allow the safe export of grain from Ukraine, as well as a ban by the Indian government on the export of some types of rice.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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