UK grocery inflation slows to 2.1%, lowest in two years
Grocery inflation in the UK has slowed to the lowest rate in almost two years, bringing some relief to households, a monthly survey shows (ahead of tomorrow’s official inflation data).
Inflation at supermarkets and other grocers eased for a fifth month, to 2.1% in the four weeks to 9 August – the lowest since October 2024, according to Worldpanel by Numerator.
Shoppers continue turn to promotions to keep costs down, with 31.3% of sales including a deal in the last month – the highest level this year.
While premium own-label supermarket products moved back into double figures for the first time since March at 11.1%, 96 million shopping trips included a value own-label product in the last four weeks.
Sally Ball, business unit director at Worldpanel by Numerator, said:
With inflation slowing again, this marks the fifth consecutive month of easing prices. Shoppers are feeling the relief with 39% now feeling financially comfortable, marking the highest level of financial confidence since November 2021.
But it’s by no means the same picture for all, with 20% reporting that they are struggling, and this has a clear impact on spending decisions. Among these households, 30% are more likely to prioritise grocery essentials over additional summer spending such as holidays and travel.
The hot weather drove shoppers to buy summer favourites with ice cream and sorbet sales rising 26.1% and suncream up 58.4%.
Sales of dips rose 23.3%, while coleslaw was close behind at 23.1% and potato salad up 22%. Chilled finger foods rose by 15.2%, chilled quiche by 15.8%, and chilled olives were up 13.3%.
Ball said:
The continued heat across the UK has certainly impacted the way people are eating and drinking. Earlier this summer we saw that mealtimes were being pushed later in the day, with 13% of evening meals now eaten after 8pm. Shoppers have been trying to stay cool this month, with soft drinks growing 15.1% in spend, while the freezer aisle saw shoppers stocking up on ice cream, sorbet and frozen fruit to beat the heat.
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Philip Shaw, chief economist at Investec, noted that the level of job vacancies now stands at its lowest level since April 2021. He said:
A brighter spot was that the rate of youth unemployment came down to 16.2% in June. This is relatively good news, but the data are volatile and so we would perhaps not place too much weight on one month’s data. Moreover of course this is a high level, which has climbed by over 2.5 percentage points over the past two years.
Pat McFadden, the UK’s work and pensions secretary, said:
It’s encouraging to see signs of progress in the latest figures, with employment on the up and a continued fall in unemployment rate.
He said the government had put in place reforms to overhaul the benefits system and to support people to find work, including a youth jobs grant to encourage businesses to hire young people.
We will continue to reform welfare and employment support so that more people can live independently and restore opportunity across the country.
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Sanjay Raja, chief UK economist at Deutsche Bank, noted that job vacancies – the best proxy for jobs demand – slowed. The vacancy to unemployment ratio has also been stable for a few months now at 0.4.
Second, the number of redundancies slowed to 106,000, its lowest level since July 2025. Third, the claimant count jobless rate (which measure the number of people out of work who are applying for jobless benefits) also dropped from 4.4% to 4.3%. Fourth, labour market flows point to some momentum in activity too. The underemployment rate dropped from 8.6% in the first quarter to 8% in the second quarter.
Raja added:
Put simply, while the labour market may seem stagnant on the surface, there are some signs of stabilisation on the horizon.
For the Bank of England’s monetary policy committee, today’s data won’t do much to move the dial. Weakness in headline indicators should keep the MPC stuck on the sidelines for now as markets turn their focus to tomorrow’s inflation data.
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Professor Costas Milas from the Management School at the University of Liverpool said:
Bank of England policymakers will be “reassured” that private sector wage growth slowed down to 2.8%. This, however, might only prove short-lived.
The problem is that public sector wage growth continues to outpace strongly wage developments in the private sector. Indeed, annual average regular earnings growth was 6.1 per cent for the public sector (ONS notes that public sector annual pay growth continues to be affected by variations in the timing of pay awards this year).
Cool UK jobs market 'questions need for rate hikes' – economists
James Smith, developed markets economist, UK at ING, said the cooling labour market means there is no need for the Bank of England to raise interest rates, unless there is a “severe and prolonged spike” in energy prices as a result of the Middle East war.
He has crunched today’s numbers.
If the UK economy really is picking up speed – as last week’s GDP data tentatively hints – then there’s little sign of it in the jobs market.
Admittedly, just like the growth figures, it really depends on where you look. Government is still actively hiring, a trend we’ve seen throughout this year. Payroll growth is running at 1.1% on a three-month annualised basis, though we have our doubts over how long this can continue given the more austere plans for public spending coming down the track.
In sharp contrast, consumer-facing industries (hospitality and retail) have been consistently shedding jobs, and if anything, the pace of decline is getting worse. That follows ongoing pressure since last year’s tax and minimum wage hikes. The remainder of the private sector is flatlining – and apart from last week’s more optimistic KPMG/REC hiring survey, most other surveys don’t point to any sign of an imminent upturn.
That disconnect is clearly visible in wage growth. Pay is rising by 6.1% across government, compared to just 2.8% in the private sector. Admittedly, that latter figure is being slightly depressed by “compositional” effects, something the BoE is keen to point out.
Still, the basic story here is that the jobs market is cool. We can see that in the vacancy numbers, which are still gradually falling and are well down on pre-Covid levels. We can see that in the unemployment rate, notwithstanding the latest reliability issues. And crucially for the Bank of England, there is little sign that wage growth is about to turn higher.
Barring a severe and persistent spike in energy prices, we think the Bank will keep rates on hold until next spring, before cutting rates at least twice in 2027.
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Here is our full story:
And here’s the union point of view. TUC general secretary Paul Nowak said:
Exploitative zero-hours contracts are endemic in this country, with more than 1.2 million people stuck not knowing how much they’re going to earn each week. That’s why the government must deliver on its promise of a right to guaranteed hours for everyone.
Employers are addicted to this one-sided flexibility. But the vast majority of insecure workers have struggled to meet their basic living costs because they haven’t been offered enough hours – and one in three face a financial hit of at least £3000 a year from cancelled shifts and incurred costs.
We need to get young people into work – but it isn’t good enough to push them from unemployment into rampant insecurity. No young person benefits from a race to the bottom – they deserve good, secure employment like anyone else.
It’s time for the government to double down on its plans to make work pay, expand the youth jobs guarantee, and stamp out exploitative zero-hours contracts once and for all.
The data showed UK wage growth, excluding bonuses, in the private sector slowed to 2.8% – the weakest growth rate since October 2020.
Pay growth in the public sector accelerated to 6.1%, reflecting the payment of NHS staff pay rises earlier in 2026 compared to 2025, which distorts the figure.
Jake Finney, a senior economist at PwC UK, said:
On the face of it, the latest labour market report looks relatively benign. Unemployment, employment and inactivity remain broadly stable, while vacancies edged down but are essentially levelling off. The jobs market remains soft, but it isn’t collapsing.
Introduction: Oil prices rise as US-Iran ceasefire ends; UK wage growth slows amid cost of living squeeze
Good morning, and welcome to our rolling coverage of the global economy, the financial markets, the eurozone and business.
Oil prices have risen, trading above $90 a barrel, as hopes faded for a permanent deal to end war in the Middle East and a ceasefire between the US and Iran ended, heightening fears about energy supplies.
Iran will shift to a “fully offensive“military stance as efforts have stalled towards a permanent end to the war, a senior Iranian official told Reuters on Monday, as Washington ruled out extending their temporary ceasefire pact.
Brent crude futures climbed 0.8%, to $91.60 a barrel, the highest since 30 July.
US West Texas Intermediate crude futures were up 75 cents at $85.25 a barrel, after hitting $85.37, the highest since 31 July.
Wage growth in the UK has slowed amid a cost of living squeeze, while the unemployment rate dipped slightly, official figures show.
Figures from the Office for National Statistics show average growth in total earnings, including bonuses, fell to 4.1% in the three months to June, down from 4.3% in the three months to May. City economists had forecast a bigger fall to 4%.
Excluding bonuses, regular pay growth ticked up to 3.5% from 3.4%, higher than the 3.4% expected by economists.
Liz McKeown, the ONS director of economic statistics, said the data showed “some softening” in the jobs market despite a broadly unchanged overall picture.
Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.
The UK’s unemployment rate remained at 4.9% in the three months to June. The number of job vacancies remain on a downward trend, falling 6,000 to 707,000 in the three months to July.
Felix Feather, economist at the fund manager Aberdeen, said:
Today’s labour market figures continue to point to a softening UK jobs market.
Regular private-sector pay growth, which is closely watched by Bank of England officials, eased to 2.8% from 2.9% previously. Meanwhile, the more timely indication from PAYE payroll data showed employment fell again, this time by 13,000.
Broadly, the labour market has been loosening for some time. Hiring activity has softened, vacancies have trended lower, and businesses continue to face a challenging demand environment.
This underlines our expectation for the Bank of England to be on hold for the rest of the year. Still, we expect inflation will jump at tomorrow’s reading, due to the recent uplift in the energy bill price cap, challenging the impression of domestically generated disinflation reflected in the recent dataflow.
The Agenda
9.30am BST: UK Private rents and house prices for August
10am BST: Germany ZEW confidence for August
1.30pm BST: US Housing starts for July
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