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Grocers feel pain of a thousand price cuts

If you felt you were getting more bang for your buck when you went shopping last month, that’s because you were. Stores dropped their prices in September.

The latest shop price index from the British Retail Consortium and Nielsen shows that overall shop prices were down by 1.8 per cent last month, after a 2 per cent decline in August.

Grocers were the most under pressure, with food price deflation reaching a record low, down 1.3 per cent in September compared with August, when food prices slipped by 1.1 per cent.

This was the second consecutive month that food had fallen at a record low deflationary rate, Mike Watkins, head of retailer and business insight at Nielsen, said. “With a new round of price cuts by supermarkets in September and fresh foods also promoted to encourage visits, this has helped to maintain deflation in shop prices,” he said. “Retailers continue to offer price cuts as part of their drive for market share.”

Both Wm Morrison and J Sainsbury have highlighted the price-cutting under way in their fresh produce. The fight under way between the country’s Big Four grocers and Aldi and Lidl, the discounters, means that buying an average basket of grocery products has never been cheaper.

Separate research by has found that the price of a basket of 35 popular grocery products was £83.19 in September, down 16p from August. It is also more than 3 per cent, or £2.74, cheaper than it was in September last year.

Gilad Simhony, chief executive of mySupermarket, said that broccoli was 11 per cent cheaper in September than in August, while crisps and eggs were 5 per cent and 3 per cent dearer, respectively, adding: “The price wars between the retailers appear to have overcome any inflation issues caused by weaker sterling.”

Helen Dickinson, chief executive of the retail consortium, said the figures showed that there was little change in the trend for cutting prices. She said the fall in food prices was not only the highest year-on-year drop on record but also the second consecutive month, since the shop price index began, that food prices had fallen by more than 1 per cent.

She said: “We are now in the fourth year of falling shop prices. This is a direct result of the intense competition and transformational change in the retail industry, with consumers having access to more choices and greater ability to compare prices than ever before.”

Mr Watkins said that warm, late summer weather was affecting retailers in the “non-food channel”, such as fashion, and he predicted further price discounts this month.

However, he added: “The low levels of shop price deflation we have witnessed over the last few years will not be around for much longer and we expect shop price deflation to be closer to zero at the turn of the year.”

Source: - 5 October 2016