Supermarket discounts drive grocery inflation down to 4.7% ahead of chancellor’s budget

Grocery price inflation fell to its lowest level in more than two years last month, as supermarkets increased discounts to attract cost-conscious shoppers in the run-up to the Chancellor’s Budget and the Christmas trading season.

According to new data from Worldpanel by Numerator, grocery inflation slowed to 4.7 percent in the four weeks to November 2, down from 5.2 percent the previous month. The drop came as supermarkets launched a wave of price cuts and promotions to offset consumer anxiety ahead of Rachel Reeves’ Autumn Budget, which is due to be delivered just four weeks before Christmas.

Spending on promotions rose 9.4 percent during the period, accounting for nearly a third of total grocery sales, while spending on full-priced goods rose just 1.8 percent.

Fraser McFate, head of retail and consumer at Worldpanel, said supermarkets were “fully aware of the financial struggles some households are facing, not least ahead of this year’s Budget”, and were focusing on price cuts rather than multi-buy deals to offer clearer value.

He added that discounts are likely to intensify as Christmas approaches, as retailers seek to protect profit margins while maintaining customer loyalty during the difficult economic climate.

The decline in grocery price inflation reflects broader consumer trends, with overall UK inflation remaining steady at 3.8 per cent in September, according to the latest figures from the Office for National Statistics. The next official inflation data will be published on November 19.

Prices fell fastest in dog food, toilet paper and sugary sweets, while they rose fastest in chocolate, unprocessed meats and coffee, Worldpanel reported.

Despite tightening household budgets, British consumers are continuing to trade into supermarkets, with sales of premium brand ranges expected to reach a record £1 billion in December, as shoppers opt for restaurant-quality meals at home. Private label premium products generated £582 million in sales in the last four weeks.

Overall, household grocery sales grew 3.2 percent year-on-year, with most major supermarkets seeing growth. Tesco, Sainsbury’s, Aldi and Lidl all recorded gains, while Asda and Co-op shares fell.

Asda, owned by the Issa brothers and TDR Capital, reported a 3.9 per cent drop in sales over the past 12 weeks, with its market share falling to 11.6 per cent from 11.8 per cent. The Co-op’s sales fell by 1.4 per cent, bringing its share down from 5.7 to 5.4 per cent, while Morrisons saw a modest 2.3 per cent increase in sales, but lost share from 8.5 to 8.3 per cent.

By contrast, Ocado, the online grocer backed by Marks & Spencer, recorded a 15.9 per cent increase in sales, marking one of the strongest performances in the sector as more shoppers continue to mix online and in-store grocery spending.

With the crucial festive period now underway, all eyes will be on how consumers respond to ongoing price cuts – and whether further economic uncertainty ahead of the Budget will tighten the country’s restrictions or encourage early festive spending.