Shoppers faced a surprise jump in grocery inflation last month, with price rises accelerating to 4.3% in the four weeks to 22 February, according to market research firm Worldpanel by Numerator. This followed a decline to 4% in January from 4.7% in December, dealing a fresh blow to households struggling with the cost of living.
The European Central Bank's chief economist, Philip Lane, warned that prolonged conflict in the Middle East could lead to lower oil and gas supplies, causing a “substantial spike” in inflation and a “sharp drop in output” in the eurozone. The crisis has already driven energy prices higher, threatening to push up fuel costs for UK drivers and increase household gas and electricity bills.
The prospect of a UK interest rate cut later this month receded sharply as government borrowing costs rose. Yields on two-year bonds climbed by 13.5 basis points, while 10-year and 30-year yields rose by 11 and 9 basis points respectively. Financial markets now see only a 29% chance of a cut this month, down from 80% last week.
Specific categories showed notable price rises: chocolate prices remained high, up 9.3% year-on-year, although the pace is easing. Pre-made pancake mixes surged 114% in the week before Shrove Tuesday, while ingredients for homemade batter cost nearly 6% more. Valentine’s Day spending saw 12% of households buying premium meal deals, with total spending on high-end deals exceeding £39 million in the preceding week.
Among retailers, Ocado remained the fastest-growing grocer with 15.1% sales growth and a 2.1% market share. Lidl posted double-digit growth for the 12th consecutive month, up 10% with a 7.8% share. Tesco increased sales by 4.5% to a 28.5% share, while Sainsbury’s rose 5.2% to 16.1%. Waitrose achieved its highest sales growth since March 2021 at 5.6%, reaching a three-year high market share of 4.8%. Asda saw a 2.6% year-on-year sales decline, and Co-op’s fell 1.6%.
Online grocery shopping continued to grow, with sales up 9.7% year-on-year and over 18 million orders placed in the four weeks. Online represented 13% of total grocery sales, the highest level since July 2021.
