In a notable development, fierce competition among supermarkets has resulted in the first monthly decline in food prices in over two years, as reported by the British Retail Consortium (BRC).

According to the BRC, food prices in September dropped by 0.1% compared to the previous month. This decline was observed in various food categories, including dairy products, margarine, fish, and vegetables, particularly in own-brand lines.

While grocery inflation, which measures the annual rate of food price increases, remains relatively high, it has started to show signs of easing. The BRC noted that food prices rose by 9.9% in the year leading up to September, a decrease from the 11.5% rate observed in August.

Overall shop price inflation, which encompasses non-food items, reached 6.2% last month, marking the lowest rate in a year. The BRC attributed this reduction to price cuts on school uniforms and other back-to-school items.

It is important to note that when inflation rates fall, it signifies that prices are rising at a slower pace rather than decreasing outright.

Helen Dickinson, the BRC's chief executive, anticipates that the trend of price rises will continue to decelerate throughout the remainder of the year. However, she cautioned about several potential risks to this trend, including high interest rates, rising oil prices, global sugar shortages, and supply chain disruptions due to the conflict in Ukraine.

Rachel Kettlewell, founder of Fearne & Rosie Jam, a company that supplies supermarkets like Waitrose, Morrisons, and Booths, noted that her firm has observed certain costs starting to ease. Previously, the company had to make product adjustments due to rising expenses. However, with the cost of a key ingredient now decreasing, discussions about pricing and product changes with retailers have resumed.

Kettlewell also pointed out that their products consist of various components, including glass jars and paper labels, each subject to different pricing trends. Therefore, even if one element experiences a price dip, it doesn't necessarily translate to an overall reduction in the end product's cost.

Mike Watkins from NielsenIQ, which produces the shop price index with the BRC, mentioned that despite recent price reductions by supermarkets, a significant portion of households still feel the impact of rising living costs on their budgets.

The BRC's findings align with recent official inflation figures, which showed that slowing food prices played a significant role in a surprising drop in inflation in August. The Bank of England decided to maintain UK interest rates at 5.25% during its last meeting, as it anticipated further declines in inflation and recognized the economic effects of higher interest rates. Photo by Philafrenzy, Wikimedia commons.