Food prices are rising less than feared, but many families remain concerned about the cost of living, according to the boss of supermarket giant Sainsbury's. Simon Roberts said there are still worries about where food inflation will go, and it may take until late summer to see the full impact, especially in fresh food. However, he noted that price rises are not coming through as significantly as some expected, although it is still early in the year.
Lower Than Expected Food Inflation
Roberts' comments come after warnings in the aftermath of the Middle East war that food prices could surge due to increased energy and fertiliser costs, both impacted by Iran's closure of the Strait of Hormuz. The Institute of Grocery Distribution (IGD) had warned in March that food price inflation could reach 8% by June. However, it actually fell from 3.7% in April to 3% in April and further to 2.2% in May. The IGD now expects food inflation to peak at 5.5% later this year.
According to estimates, households with children will still need to find around £203 extra for food and drink this year. Inflation remained unchanged at 2.8% in May, despite expectations of a rise to 3%. The Office for National Statistics said inflation held steady as higher transport costs were offset by a fall in food price rises.
Customer Sentiment and Sales Boost
Roberts said customers are very concerned about the cost of living, but he also revealed that the start of the World Cup and last week's heatwave had boosted people's moods. "We look at customer sentiment and there was a tick-up last week with the weather and the World Cup and a whole bunch of things coming together," he said. "Last week was really exceptional." The heatwave led to record sales of pizza and ice cream, with a further boost expected next week with the return of scorching weather.
Call for Pro-Business Policies
Roberts urged Andy Burnham, expected to become Prime Minister, to ease pressure on business. "The grocery industry and the everyday economy has a really big role to play in accelerating growth," he said. "We want policies that will help build optimism and make consumers feel more confident."
Sainsbury's Financial Performance
Sainsbury's reported an "encouraging start" to its financial year, with total retail sales, excluding fuel, growing by 2.7% to £9.15 billion in the 16 weeks to June 20, compared with the same period a year earlier. This was buoyed by stronger growth in its core grocery business, while general merchandise, including clothing brand Tu, and its Argos business both reported declines.
