Grocery price inflation eased to its lowest level in more than two years last month as supermarkets increased discounts to attract cost-conscious shoppers in the run-up to the chancellor’s budget and the Christmas trading season.
According to new data from Worldpanel by Numerator, grocery inflation slowed to 4.7 per cent in the four weeks to 2 November, down from 5.2 per cent the previous month. The decline came as supermarkets rolled out a wave of price cuts and promotions to offset consumer nervousness ahead of Rachel Reeves’s autumn budget, which is due to be delivered just four weeks before Christmas.
Spending on promotional offers surged 9.4 per cent during the period, accounting for almost a third of all grocery sales, while spending on full-priced goods rose only 1.8 per cent.
Fraser McKevitt, head of retail and consumer insight at Worldpanel, said supermarkets were “very alive to the financial struggles that some households are facing, not least ahead of this year’s budget,” and were focusing on price cuts rather than multibuy deals to deliver clearer value.
He added that discounting was likely to intensify as Christmas approaches, with retailers seeking to protect margins while maintaining customer loyalty during a challenging economic climate.
The easing in grocery inflation mirrors broader consumer trends, with overall UK inflation holding steady at 3.8 per cent in September, according to the latest figures from the Office for National Statistics. The next official inflation data will be published on 19 November.
Worldpanel reported that prices were falling fastest in dog food, toilet paper and sugar confectionery, while rising quickest in chocolate, unprocessed meat and coffee.
Despite tighter household budgets, British consumers continue to trade up within supermarkets, with sales of premium own-label ranges expected to reach a record £1 billion in December, as shoppers opt for restaurant-quality meals at home. Premium private-label products generated £582 million in sales in the latest four-week period.
Overall, take-home grocery sales grew 3.2 per cent year-on-year, with most major supermarkets seeing growth. Tesco, Sainsbury’s, Aldi and Lidl all recorded gains, while Asda and the Co-op slipped back.
Asda, owned by the Issa brothers and TDR Capital, reported a 3.9 per cent fall in sales over the past 12 weeks, with market share dipping to 11.6 per cent from 11.8 per cent. The Co-op’s sales fell 1.4 per cent, reducing its share from 5.7 to 5.4 per cent, while Morrisons saw a modest 2.3 per cent rise in sales but still lost share, falling from 8.5 to 8.3 per cent.
By contrast, Ocado, the online grocer backed by Marks & Spencer, recorded a 15.9 per cent surge in sales, marking one of the strongest performances in the sector as more shoppers continue to blend online and in-store grocery spending.
With the crucial festive period now under way, all eyes will be on how consumers respond to ongoing price cuts — and whether further economic uncertainty ahead of the Budget will tighten the nation’s purse strings or encourage early festive spending.
Amy Ingham
Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.