US Edition
Grocery inflation has fallen to its lowest level in two years as the cost of living crisis finally eases.
The price of supermarket goods rose 4.5pc in the year to mid-March, according to data analytics firm Kantar – the slowest increase since February 2022, when Russia’s invasion of Ukraine pushed up the costs of energy and many food ingredients.
The slowdown is the latest sign of overall prices in the economy turning a corner and cooling significantly, boosting hopes of interest rate cuts within months.
Fraser McKevitt, of Kantar, said: “Grocery inflation has come down significantly since hitting an eye-watering peak of 17pc in March 2023. However, despite this continued slowdown many British households are still feeling the squeeze.”
Around one in four households still say they are finding it hard to cope with financial pressures, Mr McKevitt noted.
This share has remained the same since November last year, as families struggle to adjust to a surge that led many everyday items to double in price over the past two years.
Shoppers battling rising living costs and higher mortgage rates are relying more on discounts and actively seeking out cheaper groceries, according to Kantar.
Mr McKevitt said that premium own-label lines from supermarkets – such as Tesco Finest – had been a big beneficiary of consumers trading down, with a 16.1pc rise in sales over the past month. This was the biggest rise in almost three years.
Online retailer Ocado became the fastest growing company after a sustained voucher campaign to lure in new customers. Its sales soared by 9.5pc over the past three months, while the wider online market improved by 6.6pc.
Asda was the slowest growing of the large players, with sales rising by just 0.2pc.
It comes as retailers are boosted by an early Easter, lifting take-home grocery sales by nearly 5pc in the month to 17 March.
Hot cross buns are selling in 15pc larger volumes than during the same time last year and many shoppers are stocking up on chocolate eggs, Kantar said.
However, chocolate prices are set to rise as a result of the soaring cost of raw cocoa.
The price of a ton has surpassed $10,000 (£7,917) for the first time ever on Tuesday after futures jumped as much as 4.5pc in New York.
The price of cocoa has risen by 273pc over the past 12 months, a rally which demonstrates the “complete panic” that has gripped the market according to Ole Hansen, head of commodity strategy at Saxo Bank.
A range of factors are behind the recent surge, including the spread of disease, lack of fertilisers and overall underinvestment into crops
Earlier this month, Swiss chocolate maker Lindt warned that its prices would have to rise this year and next, having risen by 10pc over 2023.
The easing of grocery inflation comes after gas prices fell to levels last seen well before the invasion of Ukraine, paving the way for interest rates to come down.
Policymakers at the Bank of England remain concerned, however, that rapidly rising wages are still keeping inflationary pressures elevated, especially among services businesses.