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Research from Kantar indicates that food price rises are returning to more typical rates, with grocery price inflation dropping to 2.4%, the lowest since October 2021.
Despite this easing, shoppers continue to favor cheaper own-brand goods, suggesting that the habits formed during the cost-of-living crisis persist.
The findings come ahead of official inflation figures due on Wednesday, expected to show a significant drop in overall inflation. This has raised expectations that the Bank of England may cut interest rates this summer.
Fraser McKevitt, head of retail and consumer insight at Kantar, noted that typically a 3% inflation rate triggers marked changes in consumer behavior. However, after nearly two and a half years of rapidly rising prices, it might take longer for shoppers to revert to previous spending habits. Own-label lines remain resilient, growing faster than branded goods and making up over half (52%) of total spending. Premium own-label ranges have also seen a 9.9% increase from a year earlier.
Kantar also anticipates that summer sports events like the Euro 2024 men’s football tournament and the Olympic Games will boost sales, particularly of alcoholic drinks. For example, take-home beer sales peaked during England’s quarter-final match against France in the 2022 FIFA Men’s World Cup, marking the year’s highest daily takings outside of Christmas.
Overall inflation reached 11.1% in late 2022, with food and non-alcoholic drink prices rising nearly 20% last year, the highest since the 1970s. In response, the Bank of England raised interest rates to 5.25%, a 16-year high, to curb inflation by making borrowing more expensive and encouraging saving.
As inflation continues to fall, the most recent data showed a 3.2% rise in prices in the year to March. The upcoming figures are expected to show a rate close to the Bank’s 2% target, fueling speculation about a potential rate cut.
In summary, while food price inflation is normalizing, the lasting impact of high prices means consumers are still focused on cost-saving measures. The potential for interest rate cuts from the Bank of England remains a topic of keen interest as the economic landscape continues to evolve.
