The price of food in the big four supermarkets rose sharply in December – flying in the face of retailer claims that inflation had peaked.
The Grocer Price Index reveals that the retail price of groceries was 2.5% higher in December than November, and was up 15.1% on last Christmas. Prices at Asda rose most sharply, up 4.2%, while Morrisons’ rose the least, up 0.4%.
The cost of food had been relatively stable for the previous four months, with prices in November up just 0.1% on October.
The collapse of sterling late last year sparked much of the subsequent increase as the cost of imports, particularly fresh fruit and vegetables, rose sharply.
“Given we’re in the midst of a global recession, the weak pound is really the only underlying reason for prices to go up,” said one analyst. “Most other factors should push prices downwards: oil prices are well down from their peak, demand is down due to the recession and there hasn’t been any major adverse weather.
“That said, the cost of finance may have some slight effect. The result of tightened credit is that debt is more expensive and some of that cost may need to be passed on.”
Retail price inflation was mirrored by rising commodity prices, again predominantly due to adverse exchange rates.
Food oils were hit particularly hard, with palm oil rising 14.1% and soya oil up 10%. Anticipated falls in commodity prices have not materialised. Seven of the 12 key food commodities tracked for The Grocer by Mintec are up in price year-on-year.
So-called “soft” commodities such as coffee, sugar and cocoa, have also risen strongly after strong speculative activity. The price of cocoa is up 67.7% year-on-year amid serious concerns about supply in the next 12 months.
The Ivory Coast, the world’s main cocoa supplier, has been thrown into political turmoil and crippled by a series of strikes. Poor weather and crop damage from “black pod” disease have also conspired to keep prices high.
However, there are some signs December’s sharp rise in inflation may not be sustained over the next few months.
“The big four retailers had all run a long and heavy campaign of promotional discounts on everyday staple items, which had helped keep price inflation down,” said Kay Staniland, managing director of the promotion tracking consultancy Assosia.
“But for Christmas they shifted to massive discounts on luxuries such as wine, spirits and chocolates.
“As we move back to normal trading and the supermarkets start promoting normal grocery again, this could have a significant effect on price.”
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