Food inflation drops as grocers ramp up promotions

Food inflation slowed to 4% in March according to the BRC-Neilsen Shop Price Index, down  from 4.5% in February. This is the sharpest monthly fall since August 2009 as grocers continue to use unprecedented levels of discounting to drive sales.  

The BRC calculated that 40% of groceries bought were on promotion, an all time high.

March was the second consecutive month that food inflation has slowed despite pressure from rising commodity and oil prices.

Overall shop price inflation slowed to 2.4%, compared with 2.7% in February. Non-food inflation slowed to 1.5%, compared with 1.6% the previous month.

BRC director general Stephen Robertson said that the “consistently low rate of inflation for non-food goods shows retailers are still absorbing much of the VAT rise themselves”.

Prices fell in clothing and footwear, with deflation rising to 1.4% in March, from 1% in February. Prices also dropped in electricals, with deflation rising to 2.2% in March from 2% in February.

Robertson said: “Global commodities are still exerting considerable upward pressure on retailers’ costs, but a greater intensity of promotions has led to a fall in year-on-year food inflation which will come as a great relief to hard-pressed families.”

The falling shop price inflation is well below the wider Consumer Price Index which is 4.4% which Robertson said indicated that inflation is not coming from the high street but by escalating fuel prices and utility bills.

Falling inflation is not expected to last as continued political unrest in Libya and other oil producing countries is keeping oil costs high which the BRC predicts is likely to work its way through the supply chain.