Inflation returns as supermarkets enjoy record Christmas, Kantar says

As inflation returned to the grocery market after a two-year absence, supermarkets enjoyed record sales over the Christmas period, according to fresh industry data on Tuesday.

As prices rose for items such as fish and butter, only partly offset by falling prices for eggs and bacon, Kantar Worldpanel calculated that supermarket inflation reared up to 0.2% for the 12 weeks ending 1 January, following 30 months of industry deflation.

Kantar revealed that shoppers spent almost £0.5bn more across the UK supermarkets sector compared to last year and that it was the first time that all four of the 'big four' grocers have all grown since June 2014, with a collective sales increase of 0.1% in the 12-week period.

Looking Tesco continued its recovery with a sales increase of 1.3% in the 12-week period, though this was not enough to prevent it losing 0.1 percentage point of market share to 28.2%.

Sainsbury’s sales declined 0.1%, in spite of a strong period for online sales growth after its Argos acquisition.

Asda sales were down by 2.4%, which was much improved from the 4.7% decline reported in December.

Morrisons, which also reported its own trading update on Tuesday, was recorded to have grown 1.2%, which was its first period of growth under Kantar's system since June 2015 as the effect of site sales and store closures worked its way out of the system.

Fraser McKevitt, Kantar's head of retail and consumer insight, said: “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.

"Last year retailers focused on simplifying their discounts and offers, and the level of promotional sales has fallen to 37% as a result – the lowest level over Christmas since 2009.”