(Bloomberg) -- UK grocery inflation rose for the first time since March 2023, according to data released days after the Bank of England cut interest rates from a 16-year high.
Supermarket prices rose 1.8% in the four weeks to August 4 from a year earlier, research company Kantar said Tuesday. That’s an acceleration from the 1.6% year-on-year increase the month before.
The findings are an early challenge for the new Labour government, with Chancellor of the Exchequer Rachel Reeves tasked with reviving the economy after soaring inflation piled pressure on household bills.
The BOE cut rates earlier this month for the first time since 2020 and signaled more reductions ahead. But official data on Wednesday is expected to show inflation picked up, which is likely to keep policymakers wary about reducing rates further next month.
While prices are accelerating again after 17 consecutive months of decline, it marks a return to average grocery inflation seen in the five years before the cost-of-living crisis, said Fraser McKevitt, head of retail and consumer insight at Kantar.
Shoppers are seeking out promotions to keep their grocery bills down, he said, with spending on deals climbing 15% in the period.
It comes as shoppers take advantage of competitive pricing among grocers fighting for market share, with sales at discounters Lidl and Aldi both gaining.
J Sainsbury Plc recorded its largest year-on-year increase in market share in more than 27 years, edging up 0.5 percentage points in the 12 weeks to August 4. It comes at the expense of Asda, which saw its market share fall 1.1 percentage points as the supermarket group struggles to compete.
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