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Food price inflation remained at 2.2% in October, according to the latest BRC-Nielsen shop price index, but fresh food inflation is increasing while ambient inflation eased last month.

Food prices recorded the same increase as in September, of 2.2%. Fresh Food inflation accelerated to 2.2% in October from 1.8% in September, while ambient food inflation fell backed to 2.2% from a 2.7% jump in September.

Overall shop prices decreased at the same annual rate as in September. The 0.1% deflation is the shallowest deflation rate in the last four years.

Deflation of non-food products was 1.5%, also the same rate as September.

BRC chief executive Helen Dickinson commented: “Forces on inflation are pulling in both directions. On the one hand global food prices continue to head upwards at the same time as the weaker pound has left retailers facing significantly higher bills for imported goods. On the other hand, the tightening squeeze on discretionary spending power is reducing the ability of retailers to pass on increased import costs.

“These dynamics are playing out differently across the industry. Food inflation remains firmly in positive territory, while electronics recorded year on year inflation this month, for the first time since the SPI began in 2006. However, a sharp increase in promotional activity, in order to clear stock, pushed both clothing and furniture further into deflation.

“This month’s figures only serve to illustrate the enormous challenges of the current environment. And while retailers are doing their best to provide value to keep prices low for consumers who are feeling the pinch of falling real wages, in an industry where margins are already low, the capacity to absorb further cost increases is wearing thin.”

Mike Watkins, head of retailer and business Insight at Nielsen, commented: “Disposable income is coming under pressure however consumers are benefiting from the continuation of promotional activity, the use of vouchers and price cutting, in particular by supermarkets.

“This is going some way towards making up any shortfalls in spending power as cost price inflation begins to impact prices. Non food retailers have also been combating unseasonable weather and weakening consumer demand which means price points are being kept sharp for the season”

Morning update

Irish food and nutrition group Glanbia (GLB) has issued an interim management statement for the nine months ending 30 September this morning.

Over the period wholly owned revenue from continuing operations increased 6.6% on a reported and constant currency basis. On a constant currency basis, this was driven by volume growth of 2.4%, pricing growth of 0.9% and a contribution from acquisitions of 3.3%.

Total group revenues, including Glanbia’s share of JVs and associates, increased 13.5% on a reported basis and 13.7% on a constant currency basis, driven by 2.3% volume growth, 6.4% price improvement and a 5% contribution from acquisitions.

Glanbia’s performance nutrition business saw revenue growth of 9% in the period, with volumes up 2.7% and the acquisition of Amazing Grass and Body & Fit adding 7.4% to headline sales.

Glanbia said the full-year outlook for its GPN division “is good” and it expects delivery of like-for-like branded revenue growth in the mid-single digit range for the full year recognising a seasonal uplift in quarter four. Full year EBITA margins are expected to be in the mid teen range broadly in line with half year 2017 levels.

Glanbia’s nutritionals division saw revenue growth of 4.6%, driven by 2.1% volume increases and 2.5% price increases as dairy markets improved.

It said US cheese performance was somewhat challenged in the period with product mix adverse due to cheese market dynamics where supply has outpaced demand for certain formats. Overall, pricing was in line with prior year and volume declined marginally. However, the full year 2017 outlook for GN is “good”, with revenue and EBITA growth expected to be driven by volume and pricing growth.

Overall Glanbia reiterated its guidance that on a pro-forma basis adjusted earnings per share is expected to grow between 7% - 10% constant currency for full year 2017.

Siobhán Talbot, Glanbia’s group MD said: “Glanbia delivered a good result in the first nine months of 2017 with wholly owned revenue from continuing operations growing 6.6% in the period. Glanbia Performance Nutrition as the main driver of revenue growth with Glanbia Nutritionals (“GN”) continuing to perform well. The outlook for the remainder of 2017 is positive and we reiterate our full year guidance.”

On the markets this morning, the FTSE 100 has opened up 0.3% at 7,518.8pts.

Glanbia is up 1.7% at €16.80 after its third quarter trading update this morning.

Other risers include McBride (MCB), up 2.3% to 220p, Tate & Lyle (TATE), up 1.9% at 658.5p and Nichols (NICL), up 1.9% to 1,799p.

Marks & Spencer has plunged 3.5% to 332.2p after fashion bellwether Next (NXT) warned this morning of an “extremely volatile” market.

Other fallers included Primark owner Associated British Foods (ABF), down 2.6% to 3,245p, Tesco (TSCO) and Sainsbury’s (SBRY), down 1.2% to 179.3p and 1.1% to 239.8p respectively.

Yesterday in the City

The FTSE 100 closed yesterday flat at 7,493.1pts as further gains in the value of the pound ahead of an expected interest rate rise this week put pressure on fmcg multinationals.

The pound was up amid news that a sixth round of Brexit talks will take place next week – giving some hope of progress on a UK/EU deal – and ahead of the widely expected move of UK interest rates back to 0.5% from 0.25%.

Sterling was up by nearly 0.5% against the dollar and euro at US$1.327 and €1.139 respectively.

The strengthening pound hit the tobacco firms, with Imperial Brands (IMB), down 2.2% to 3,070.5p and British American Tobacco (BATS), down 0.9% to 4,871p.

Unilever (ULVR), which reports group revenues in euros, rose 1% to 224.2p.

Elsewhere, Ocado (OCDO) was up 1% to 287.7p, while Just Eat (JE) jumped 5.4% to 780p, Hotel Chocolat (HOTC), was up 4.5% to 347p, Conviviality (CVR) rose 2.7% to 425.25p, Majestic WINE (WINE) was up 2.7% to 370.5p and McColl’s (MCLS) rose 1.9% to 285.75p.

Fallers included Morrisons (MRW), down 1% to 3,070.5p ahead of its quarterly trading update tomorrow morning.

Science in Sport (SIS), was down 2.7% to 71.5p, McBride (MCB) fell 2.7% to 215p, Premier Foods (PFD), dropped 2.5% to 39.25p and B&M European Value Retail (BME), fell 0.9% to 397.3p.

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