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Supermarket price inflation escalated to its highest level for five months in December as coronavirus restrictions and the UK’s imminent exit from the EU reversed deflationary trends in grocery.

The Grocer Price Index, collated by Edge by Ascential from over 61,000 individual SKUs, showed that price inflation rose to 0.4% in December from deflation of 0.8% in November.

That marked the highest level of price inflation since June, when inflation was also 0.4% as it declined from a spike of 2% in April 2020.

While supermarkets have not seen the same kind of shortages and demand spikes that occurred during the first lockdown, increased coronavirus restrictions and the threat of disruption to supplies from the UK’s exit from the EU has seen inflation return to market as supermarkets adjust promotional mechanics.

However, two of the big four remain in deflation – with Asda prices down 0.6% year on year and Sainsbury’s down 0.5%. Tesco showed the highest level of price inflation at 1.5%, while Morrisons moved back into inflation of 0.8%.

Prices remained flat during the month at Waitrose, which is not included in the GPI.

On a category basis, soft drinks showed the biggest price increases (+2.6%), with baby goods (+2%) alcohol (+1.4%) and health and beauty (1.1%) also contributing to the inflationary rebound.

Morning update

UK GDP fell by 2.6% in November 2020 as government restrictions reduced economic activity, according to the Office of National Statistics.

November GDP fell back to 8.5% below the levels seen in February 2020 compared with 6.1% below in October 2020. GDP fell by 8.9% in the 12 months to November 2020, compared with an annual decline of 6.8% to October.

The services sector acted as the main drag on growth in November, falling by 3.4% as restrictions on activity were reintroduced in some parts of the UK in response to the coronavirus (COVID-19) pandemic. The services sector is now 9.9% below the level of February 2020.

The production sector also fell marginally by 0.1% in November 2020, remaining 4.7% below the February 2020 level. Elsewhere the construction sector saw positive growth of 1.9% in November 2020, recovering to 0.6% above the February 2020 level.

The Business Impact of Coronavirus Survey (BICS), which covered the dates 14 to 27 December 2020, found that of businesses currently trading, 42% reported their turnover had decreased below what is normally expected for December, compared with 45% reporting decreases at the end of November in Wave 19.

British American Tobacco has announced the investigation by the UK’s Serious Fraud Office into suspicions of corruption has been discontinued.

The investigation was announced on 1 August 2017 relating to its activities in Africa.

BAT said it is “pleased” that the SFO has closed its investigation and that the SFO is taking no further action in respect of this matter. “BAT remains committed to the highest standards in the conduct of its business,” it stated.

On the markets this morning, the FTSE 100 has fallen back 0.6% to 6,764.6pts so far this morning.

Early risers include Science in Sport, up 2.2% to 39.9p, SSP Group, up 2% to 337.2p and Stock Spirits Group, up 1.4% to 284.9p.

Fallers so far today include Hilton Food Group, down 10.8% to 1,038p, McColl’s Retail Group, down 5% to 25.6p and Just Eat Takeaway.com, down 3.3% to 8,006p.

Yesterday in the City

The FTSE 100 recovered 0.8% yesterday to close at 6,802pts following three consecutive days in the red.

Tesco ended the day marginally down, falling 0.3% after falls of almost 3% early in the day, as it admitted to incurring an extra £85m of coronavirus costs despite posting strong third quarter and festive sales like for like sales growth of 6.7% and 8.1% respectively.

Bakkavor was a double-digit riser, climbing 11% to 90.6p after it reported an “encouraging recovery” in performance in the second half of 2020 with group revenue for the full year 4.9% lower than the prior year.

Other risers included Finsbury Food Grup, up 6.8% to 79p after posting a “resilient” trading performance, with total first half sales down 4.1% against a strong comparative period in 2019.

Also on the up were WH Smith, up 4.3% to 1,642p, Greencore, up 4.1% to 110.2p, PZ Cussons, up 4% to 235p, Marks & Spencer, up 3.8% to 138.1p, Nichols, up 3.5% to 1,242.5p, Greggs, up 3.4% to 1,863p, Hilton Food Group, up 3% to 1,164p and SSP Group, up 2.9% to 330.6p.

The day’s fallers included Just Eat Takeaway.com, which was down a further 4.6% to 8,280 after Tuesday’s trading update, Pets at Home, down 2.9% to 406p, B&M European Value Retail, down 2.2% to 518.6p and Naked Wines, down 1.7% to 654p.

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