Lower prices for chocolate and jam slow food inflation

Falling prices for chocolate, sugar and jam have helped slow food inflation to its lowest level in more than two years, according to new industry figures.

The British Retail Consortium (BRC) said competition between retailers had led to prices of some goods falling in March, but Easter gifts were more expensive.

The overall rate at which prices rose nearly halved to 1.3%, compared to 2.5% in February, it said.

Food inflation has fallen for 10 months in a row.

But overall, food prices were 3.7% higher than a year ago, down from 5% in February, the federation said.

The BRC said retailers competed “fiercely” for deals, especially in the run-up to Easter.

Prices of dairy products and chocolate fell in March, while prices of electrical goods, clothing and shoes also fell as a result of promotions.

Helen Dickinson, chief executive of the BRC, said: “While Easter sweets were more expensive than in previous years due to rising global cocoa and sugar prices, retailers offered sporadic deals on popular chocolates, resulting in prices falling compared to the previous month.

Inflation for non-food retail goods fell to 0.2% in March, down from 1.3% the previous month. Headline inflation, the overall rate at which prices rise and the measure used to assess the cost of living, is currently 3.4% in the UK.

However, Dickinson told the BBC Today program that although high commodity prices caused by global shocks have largely eased, consumers should not expect pre-pandemic prices to return.

“We will not see significant price declines back to pre-Covid levels,” she said. “To do so would require a contraction not seen since the Great Depression (of the 1930s).”

Other costs associated with wages, energy and other goods have “come in”, which Dickinson said could threaten the downward inflationary trend, along with changes to regulations and border checks after Brexit.

“These costs include a 6.7% rise in business rates, ill-considered recycling proposals and new border checks – all at the same time as the biggest increase in the national living wage on record,” she said. “The risks are to the upside as we enter the second quarter of the year.”

The government's minimum wage, known as the National Living Wage, has risen by more than £1 for the first time, providing a boost to 2.7 million low-paid workers.

The pay rate rose on 1 April from £10.42 to £11.44 for over 21s.

In preparation for the new minimum wage, several supermarkets, including Tesco, Sainsbury's, Asda, Aldi, Lidl and M&S, have increased wages for staff outside London to £12 an hour, with competition remaining fierce to attract staff.

Dickinson told the BBC: “The job market is still really tight, there are still over 100,000 vacancies in the retail sector, and that's not just within stores, but within head offices, within distribution.”

“This will keep the impact of labor costs higher than they would otherwise be on prices for consumers.”

Mike Watkins, head of retail and business at NielsenIQ, which also prepared the BRC report, said the decline in food inflation was “expected”.

This has been helped by intense competition between supermarkets, he said, as they look to increase footfall, with focused price cuts and promotions earlier in the month for Mother's Day and now again in the weeks leading up to Easter.