UK Grocery Inflation Edges Up for the First Time Since March 2023

By James Davey
LONDON (Reuters) – UK grocery inflation increased this month for the first time since March 2023, as per industry data released on Tuesday.

Market researcher Kantar reported that annual grocery price inflation stood at 1.8% for the four weeks ending August 4, up from 1.6% in the prior four-week period.

“Having reached its lowest rate in almost three years in July, August saw inflation nudge up again slightly,” said Fraser McKevitt, head of retail and consumer insight at Kantar.

McKevitt added, “While this is noticeable following 17 straight months of falling rates, it actually marks a return to the average levels seen in the five years before the start of the cost of living crisis.”

The British Retail Consortium cautioned last month about the potential for renewed inflationary pressures as last year’s drop in commodity prices diminishes, compounded by climate change impacting harvests due to unusually wet weather in England and extreme heat elsewhere. Wage inflation is also contributing to rising prices.

Kantar indicated that prices are climbing fastest for vitamin and mineral supplements, fruit juices and drinks, and chocolate confectionery, while they are declining most significantly for toilet tissues, bottled cola drinks, and dog food.

Official data from last month showed UK inflation held steady at 2% in June, lower than figures in the United States and the euro area. Data for July is anticipated to show an uptick.

Kantar’s data, the latest snapshot of UK consumer behavior since the July 4 national election, revealed take-home grocery sales surged by 3.8% in value year-on-year for the four-week period.

Notably, sales of wine, beer, and snacks received a boost from the Euro 2024 soccer championship’s conclusion and the Paris Olympics’ onset. Additionally, barbecue food sales were elevated due to returning nice weather.

In the 12 weeks to August 4, online supermarket Ocado was the fastest-growing grocer, with sales up 11.3% year-on-year. Ocado’s shares rose by 2% in morning trading.

Market leader Tesco saw growth of 4.9%, while Sainsbury’s experienced a 5.2% rise. Shares for both increased by about 1%.

Conversely, Asda lagged with a 6.0% drop in sales and lost 1.1 percentage points of market share year-on-year, reporting a 5.3% fall in second-quarter sales.

UK Supermarkets’ Market Share and Sales Growth (%)

Source: Kantar