Food prices rise as inflation returns to UK supermarkets

Grocery prices are rising across the UK's supermarkets for the first time since 2014, figures show.

Like-for-like prices increased by 0.2 percentage points bringing a return to inflation after 28 months of deflation in the market, according to Kantar Worldpanel figures for the 12 weeks to January 1.

The turnaround follows months of warnings from the sector that prices would have to go up as a result of the weaker pound.

Meanwhile, supermarkets enjoyed a record Christmas with sales up by 1.8%, the fastest growth since June 2014.

Consumers spent around half a billion pounds more in December than they did the year before, with more than half the population braving a grocery store on Friday 23rd.

The typical household spend for December reached £365 this year - £52 more than the average month.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: "Year-on-year market growth has been helped by comparisons to a weaker Christmas in 2015, but sales were also buoyed by strong consumer appetite for festive celebration after a turbulent year."

He added: "The long-anticipated return to inflation suggests that the speed of growth in the overall market will continue to hasten in 2017, and both consumers and retailers will be looking at ways to avoid increasing the cost of the weekly shop."

The big four supermarkets together accounted for 71.4% of market share, with a sales increase of 0.1% - the first time that all four have collectively grown since June 2014.

Tesco's revival received a further boost with a 1.3% sales increase helped by improvements to its fresh food range, although its market share fell 0.1 percentage points to 28.2%.

Sainsbury's saw a marginal sales decline of 0.1% while enjoying a record Christmas online, and Asda saw sales fall by 2.4%, marking it as the worst performer among the big four.

Morrisons increased total sales by 1.2%, but Iceland's stellar performance in widely publicised pre-Christmas taste tests saw its sales jump by 9.6%.

Year-on-year, Aldi grew sales by 11.8% and market share to 6%, while Lidl's sales growth of 7.5% increased its share by 0.2 percentage points to 4.4%.

Separate Nielsen figures also show supermarkets saw their best Christmas trading period for four years after Britons left their grocery shopping particularly late.

Takings at the tills for the four weeks to December 31 were up 3.3% on last year, the highest growth since 2012 and a significant improvement on last Christmas when year-on-year growth was flat.

Mike Watkins, Nielsen's UK head of retailer and business insight, said: "Shoppers left it particularly late this year, not only because there was an extra day to do the big Christmas shop but the mild weather meant there was no need to visit the shops to stock up in advance, which benefited larger stores in particular.

"The remarkable buoyancy in shoppers spending freely in the final two weeks of the year to enjoy the festivities was good news for retailers considering the consumer head winds expected in 2017 with the return of cost price inflation - after three years of deflation - plus the ongoing uncertainty about the impact of Brexit on UK grocery sales."