Falling chocolate, sugar and jam prices helped food price inflation slow to its lowest level in more than two years, according to new industry figures.
Competition between retailers drove prices on some goods down in March, but Easter treats were more expensive, the British Retail Consortium (BRC) said. It said the overall rate at which prices rose had almost halved to 1.3% – down from 2.5% in February.
Food price inflation has fallen for 10 months in a row. But overall, food prices are 3.7% higher than they were a year ago, down from 5% in February, the BRC said.
The BRC said retailers had competed “fiercely” on deals, especially in the lead up to Easter. Prices for dairy products and chocolate were lower in March, while price tags on electrical goods, clothes and shoes also dropped as a result of promotions.
“While Easter treats were more expensive than in previous years due to high global cocoa and sugar prices, retailers provided cracking deals on popular chocolates, which led to price falls compared to the previous month,” said Helen Dickinson, chief executive of the BRC.
Inflation on retail goods other than food fell to 0.2% in March, down from 1.3% a month earlier. General inflation, the overall rate at which prices rise and the measure used to assess the cost of living, is currently running at 3.4% in the UK.
However, Ms Dickinson told the BBC's Today programme that although high commodity prices caused by global shocks had largely eased, consumers should not expect to see a return to pre-pandemic prices.
“We won't see significant falls in prices back to pre-Covid levels, to do that would require deflation that we haven't seen since the (1930s) Great Depression,” she said.
Other costs associated with wages, energy and other commodities were “baked in”, which Ms Dickinson said could threaten the downward inflationary trend, along with changes to regulations and post-Brexit border checks.
“These costs include a 6.7% business rates rise, ill-thought-out recycling proposals, and new border checks – all at the same time as the largest rise to the National Living Wage on record,” she said. “The risks are on the upside as we move into the second quarter of the year.”
The minimum wage set by the government, known as the National Living Wage, increased by more than £1 for the first time, providing a boost for 2.7 million low-paid workers. The wage rate rose on 1 April from £10.42 to £11.44 for over-21s.
In preparation for the new minimum wage, many supermarkets, including Tesco, Sainsbury's, Asda, Aldi, Lidl and M&S increased pay for staff outside of London to £12 per hour, with competition to attract staff remaining fierce.
“The labour market is still really tight, there are still over 100,000 vacancies across the retail industry and that's not just within stores, that's within head offices, within distribution,” Ms Dickinson told the BBC.
“That will keep the impact of labour costs higher than it would have been on prices for consumers.” Mike Watkins, head of retailer and business at Insight, NielsenIQ which also compiled the BRC's report, said the fall in food price inflation was “to be expected”.
He said it was “helped by intense competition amongst the supermarkets as they look to drive footfall, with focussed price cuts and promotional offers earlier in the month for Mother's Day and now again in the weeks leading up to Easter”.
