For most Retail Week readers, the cost of a pint of milk or a packet of biscuits is neither here nor there when their weekly bills are totted up.

But many shoppers will have noticed that life’s essentials and little luxuries are making a bigger dent in their income.

In October, food price inflation climbed to 4.7 per cent, according to the latest official consumer prices data. Along with petrol, it was one of the biggest risers.

Although food is still comparatively cheap, for many consumers it is a key measurement of how far their money goes. In the present jittery climate, the feeling that basics are eating up an increasing proportion of our incomes will prompt tighter control of purse strings as far as other spending is concerned. That is bad news for retailers.

Also depressing is that if store chiefs are hoping for interest rate respite soon from the Bank’s Monetary Policy Committee, they should probably forget about it.

The consumer prices figures showed overall inflation of 2.1 per cent – too far ahead of the expected 1.9 per cent for the economic grandees to think about relaxing the pressure yet. They may well be willing to sacrifice some retail sales growth on the low inflation altar.

Retailers, especially clothing groups, have already shouldered a heavy burden. Footwear and clothing prices were down 4.3 per cent in October – a sign both of retailers’ quest to provide ever-better value and the need to stage aggressive promotions to win wallet share.

It looks as if tough trading conditions will be here for a while and there is little prospect of interest rates going down soon. While Christmas may not be a washout, consumers look increasingly likely to rein in their spending come the new year.

Taking stock at Sainsbury’s

Yesterday’s interims from Sainsbury’s were the first opportunity for investors to take stock since last week’s collapse of Delta Two’s phantom bid.

Investors can now decide what real value there is in the grocer and what sort of valuation its outlook merits. Sainsbury’s story on profits, margin, market share and growth will all be scrutinised.

The Qataris always said they had faith in Sainsbury’s strategy and management. Will they hang on to their 25 per cent stake?

George MacDonald is deputy editor of Retail Week

Topics