As shoppers watch what they put in their baskets – don’t expect food price rises to end soon

Companies expect inflation to hit a peak in the second half of the year, writes Chris Stevenson

The prices of everyday goods and services have soared in the past year (PA Wire)

Nine out of 10 Britons are said to be increasingly watching what they are spending as the cost-of-living crisis bites.

Forty-nine per cent of consumers are feeling less secure about meeting day-to-day expenses within the next six months, according to data from market researcher NielsenIQ.

These findings were underpinned by the 4.1 per cent fall in UK supermarket sales volumes, year-on-year, in the four weeks to 16 July, with Nielsen detailing a 9.4 per cent dip in sales volumes of meat, fish and poultry, an 8.1 per cent fall in household items and a 6.4 per cent drop in packaged groceries. All of which is not totally surprising when you consider that inflation is inching towards double figures.

Now contrast those figures with the latest financial reports from Unilever – whose brands include Marmite, Dove and Magnum ice creams. The consumer giant has raised its sales predictions, having beaten its underlying sales forecasts for the first half of the year, mainly due to a hike in prices. The group reported sales growth of 8.1 per cent, with the price increases compensating for a fall of 1.6 per cent in the amount of goods sold.

Prices went up an average of 9.8 per cent across the group’s products. This offset around 70 per cent to 75 per cent of the increases in its costs. Russia’s invasion of Ukraine has contributed to rising energy costs and has also helped push the cost of raw materials such as wheat, sunflower oil and pulp used in packaging to record highs. The sales news pushed shares in Unilever up by more than 2 per cent by early afternoon.

Unilever’s chief financial officer Graeme Pitkethly said on a call with journalists that the company expects “peak inflation” to “come in the second half of the year” – acknowledging that the pressure on both households and companies will not end soon. Consumers, however, may hold little sympathy for the company – and the many others making similar moves – as increased costs continue to be passed down to them in increased prices.

Matt Britzman, equity analyst at Hargreaves Lansdown, made this point in responding to the results: “There’s a limit to how much someone will pay for a Magnum though, and we’ve heard from supermarkets that shoppers are now starting to slide down the value chain in an attempt to keep shopping lists intact.”

It seems that we can expect more of the same when it comes to inflationary pressure – it will be interesting to see how much shoppers are able to take.