Saturday 29 April 2017

Mixed Brexit blessing as grocery prices fall

Weak pound drives down import costs but Irish exporters face tougher time

Supermarkets are in fierce competition with each other. Photo: Stock Image
Supermarkets are in fierce competition with each other. Photo: Stock Image
Donal O'Donovan

Donal O'Donovan

The grocery market has slipped into deflation for the first time in almost two years, meaning the cost of the same basket of shopping is becoming cheaper at Irish tills.

Brexit, which has made it cheaper to import groceries from the UK, is the main cause.

Supermarket price inflation fell into negative territory to -0.2pc, according to the latest figures from Kantar Worldpanel in Ireland.

The figures cover the 12 weeks to March 26.

The data suggests that the weaker pound - which is driving up prices for consumers in the UK - is having the opposite effect here where a large volume of supermarket staples arrive from suppliers in Britain.

Sterling has fallen around 10pc as a result of the UK vote to leave the European Union. Until now the main effect seen on the economy here was the pressure piled on Irish exporters, with the likes of mushroom farmers especially hard hit.

Now, however, the weakened pound is also being passed on to Irish consumers buying goods shipped in from the UK.

But the good news for Irish shoppers may signal tougher time for businesses here.

The Governor of the Central Bank, Philip Lane, said yesterday that the weaker pound means Irish companies that have to compete with UK imports are in the "frontline" in terms of the fallout from Brexit, even more exposed than Irish exporters.

Kantar said it based its findings on over 30,000 identical products compared year-on-year in the proportions purchased by Irish shoppers.

Whether Irish shoppers pocket the savings or increase their spending grocery remains to be seen. While groceries are getting cheaper the overall cost of living continues to rise.

In March, inflation figures from the CSO showed Irish consumer prices rose by 0.6pc in February from the previous month and was up 0.5pc on last year.

Read more: Bertie Ahern: Ireland has 'every right' to negotiate with UK during Brexit talks

But the picture is uneven, with higher health, motor and home insurance premiums driving much of the increase. Rents and housing have also been rising, putting a squeeze on disposable income.

One reason why lower prices are being passed on at the supermarkets is the intense competition gripping the sector.

Supervalu has regained the title of Ireland's largest grocer displacing Dunnes Stores, which had held the slot for the previous two months.

Tesco lost its long held status as the country's biggest grocery chain by spend at the end of 2015, and in the latest rankings comes in third behind SuperValu and Dunnes.

One of the main trends driving competition is a shift to own brand products, which now account for more than half of total grocery spending.

Meanwhile, food retailer Iceland is to create 270 new jobs in Ireland this year as part of a €12m expansion that will see it open nine new stores across the country.

The company's workforce in Ireland will hit over 500 by the end of the year.

Irish Independent

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