Price wars lead to huge fall in value of food sales
The total value of food sold fell 1.4 % compared to a year earlier in the three months to July- the biggest drop since records began
Tuesday 12 August 2014
A bitter price war between the UK’s biggest supermarkets and record low inflation has seen the value of food sales fall at the fastest rate for nearly six years, according to the British Retail Consortium.
In the quarter to July, the total value of food sold fell 1.4 per cent compared to a year earlier – the biggest drop since the body began collecting figures in December 2008.
This year’s decline in sales comes against a heatwave in July last year and a barbecue blitz to celebrate the arrival of Prince George and Andy Murray’s Wimbledon victory.
But the BRC also said consumers were “taking full advantage of” the tough competition in the sector as the likes of Tesco and Morrison struggle to fend off discount rivals like Aldi and Lidl.
The BRC’s measure of shop prices showed food inflation fell to just 0.3 per cent last month, an all-time low.
David McCorquodale, the head of retail at the survey’s compilers KPMG said: “The grocers’ figures continue to make for gloomy reading for the sector. The impact of their prolonged discounting campaigns may be good news for consumers, but must be being felt deeply by the retailers.
“The headache for the grocer investor is the tonic for the consumer: it’s likely these price wars are here to stay for the foreseeable future.”
Non-food sales in contrast are up 3.4 per cent year on year as the lower cost of essentials encourages spending elsewhere.
Despite unrest in Russia and the Middle East, the downward pressure on food prices looks likely to persist with bumper harvests expected this year. Lower food prices are likely to prompt the Bank of England to cut its inflation forecasts in its latest quarterly update tomorrow.
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