The cost of food in shops was lower in March than in February this year, while like-for-like food price inflation slowed in March 2011 for the second consecutive month, a new survey shows.
The figures from the British Retail Consortium (BRC) and Nielsen found food prices in March 2011 were 4% higher than in March 2010. By comparison, a 4.5% like-for-like increase was reported for February.
On a month by month basis, food prices fell 0.5% in March after rising 0.3% in February.
This is despite a continued rises in food commodity prices and the recent surge in the price of oil due to instability in the Middle East. Last quarter saw a 25% increase in the cost of grain and 20% in wheat, while oil hit $115 a barrel in March.
“Retailers continue to use unprecedented levels of discounting to maintain sales, with 40% of all sales on promotion,” the survey found.
In the fresh food category, annual price inflation fell to 2.9% in March from 3.5% in February. Higher inflation in meats, oils and fats was offset by a sharp fall in fresh fish and fruit.
On a month-by-month basis, fresh food prices fell 0.5% in March after increasing by 0.2% in February. Overall a basket of fresh foods, measured by the Thomson Reuters/Jefferies CRB Index, was up 31% on one year ago. “We expect the rise in commodities to continue to exert pressure along the supply chain,” the BRC/Nielsen report added.
In March, annual inflation in the “ambient foods” category - foods that can be stored at room temperature - -slowed to 5.8% from 6.1% in February. On a month by month basis, prices fell 0.6% in March after rising 0.3% in February.
Rising costs of alcoholic and non-alcoholic drinks were offset by an easing in the inflation in breads and cereals, while the cost of sugar, jam and chocolate remained unchanged in March.
The report says that the 2%-above-RPI increase in alcohol duty, which is to be implemented at the end of March, will add 0.1 percentage points to the Consumer Price Index “and will effect retail disproportionately”.
BRC director general Stephen Robertson said: “On the day that National Insurance contributions rise, taking another chunk out of many people’s disposable incomes, there is some good news here.
“Over the shorter term, food was actually cheaper in March than February. It’s a clear demonstration of competition in the retail sector keeping costs down for shoppers. The proportion of groceries going through the tills on promotion has reached a new all-time high of 40%. The consistently low rate of inflation for non-food goods shows retailers are still absorbing much of the VAT rise themselves.
“Overall shop price inflation is well below the wider Consumer Price Index, which is running at 4.4%. The rise in overall inflation is not coming from the high street but is being driven by escalating fuel prices and utility bills.”
