Yahoo Finance Inflation slumps as food prices drop in the shops
Families are paying less for their food as prices fell in the shops last month, easing the pressures of the cost of living.
Food prices in March were down 0.5pc compared with February giving some respite to households, the British Retail Consortium and data group Nielsen said.
Compared with March 2017 food prices are up 0.4pc – the slowest annual rise in just over a year. Overall shop prices have fallen by 1pc on the year as a result.
One factor is that the fall in sterling in 2016 had its biggest effects last year, and so the rise in import costs is starting to fall out of the annual comparisons.
In addition the pound has nearly risen back to its pre-referendum level against the dollar, undoing some of the price rises for foods and agricultural commodities priced in US dollars.
However, that does not apply to imports from the eurozone – the pound is still down by almost 10pc against the euro.
“With inflationary pressure receding in the food supply chain, we can now expect supermarkets to focus on lowering prices and to use promotions to drive visits as part of the battle for gaining share of wallet,” said Mike Watkins at Nielsen.
“With 27pc of the value of the shopping basket being discounted by offers or short term price cuts, which is a 10-year low, shoppers will take advantage of any increase in discounting as they seek out the best value for money.”
The Bank of England expects wage growth to start picking up this year, overtaking inflation in the coming months which should boost spending power further after a year of falling real incomes.
But other factors are pushing take-home pay in different directions. A rise in the income tax threshold should put more cash in workers’ pockets this month, while an increase in the auto-enrolment pensions contributions will depress earnings.
The BRC said it is important the Government does not add any extra costs to food prices, particularly in the Brexit process.
“The support for a zero-tariff trade deal on the end-status agreement between the EU and UK, is encouraging news for retailers,” said Helen Dickinson, the BRC’s chief executive.
“But this needs to be accompanied by a focus on reducing potential customs friction on the movement of goods, in order for retailers to mitigate any further pressure on prices for their customers.”
