UK grocery prices should start to rise again by the end of this year, breaking a deflationary cycle that stretches back to September, analysts Kantar Worldpanel have said.
The forecast follows a further slowing in the pace of deflation to 1.7 per cent in the 12 weeks ended 21 June, from 1.9 per cent a month ago, the researcher said on 30 June.
Kantar’s prediction comes less than a week after market-leader Tesco said that it expects deflation to persist for the foreseeable future. Consumers are benefitting from lower prices for their food shopping as supermarkets fight back against the incursions of German discounters Aldi and Lidl, whose growth shows no sign of stopping, according to Kantar’s latest data.
“Prices have been falling since September 2014, but the rate of decline is slowing, meaning: they are projected to rise again by the end of this year,” Fraser McKevitt, head of retail and consumer insight at Kantar, said in a statement.
The research also showed that a sales recovery at Morrisons has extended to a second month, leading to its first market-share growth since December 2011. Revenue rose 0.6 per cent from a year earlier.
Sales at Tesco and Sainsbury's declined 1.3 per cent in the period, Kantar also said, with Walmart Stores' Asda chain showing a steeper drop of 3.5 per cent.
Aldi and Lidl showed sales growth of 15 per cent and 9.1 per cent, respectively, according to the data tracker. Between them, the German discounters now control 9.4 per cent of the £25.4-billion UK market, up from 8.3 per cent a year earlier.
News by Bloomberg, edited by ESM
