As supermarkets begin to announce their Christmas sales performances it would seem that belts around the UK have been loosened both before dinner and afterwards.
Morrisons’ like-for-like sales growth, ahead of forecasts at 3.7 per cent, suggests consumers forgot their frugal spending habits and indulged on food and drink.
Indeed, Kantar Worldpanel yesterday reported a 13.2 per cent jump in mince pie sales versus last year, and a 5.1 per cent lift in alcohol sales.
But as grocery inflation reaches 3.7 per cent and 2016 Christmas prices are maintained, profit margin is being eroded somewhere. And whether Morrisons or its suppliers who are taking the hit, it will be a sore one.
Sainsbury and Tesco also report this week. There is a fair chance both will have similarly upbeat news – particularly after Kantar reported Tesco’s sales growth in the 12 weeks to January 1 at 3.1 per cent.
Christmas though, is not a good time to take a true measure of the economy. Going into the new year, grocers need to watch out for the hangover after the party, when sensibilities return and belts are tightened again.
With real-time wages continuing to fall in the face of inflation which the Bank of England will spend 2018 trying to get under control, supermarkets will face a further squeeze as they aim to keep prices down while protecting margins.
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