Demise of buy-one-get-one-free deals and other promotions pushes grocery prices up 2.4 per cent in a MONTH as Britons reel from the impact of coronavirus crisis
- Prices rocketed up between March 18 and April 17, the IFS reported today
- More than half the rise could be linked to a massive decline in promotions
- It came as the UK economy shrank by an astonishing 20.4 per cent in April
- Here’s how to help people impacted by Covid-19
A dramatic fall in promotions like buy-one-get-one-free helped grocery prices soared by an ‘unprecedented’ 2.4 per cent in a single month at the height of coronavirus, a new report reveals today.
Prices rocketed up between March 18 and April 17 as the impact of the disease became apparent and consumers began to panic buy essentials like toilet paper, pasta and flour.
More than half of the price rise could be linked to a massive decline in the number of promotions being offered by retailers, the Institute for Fiscal Studies (IFS) said today.
Its director Paul Johnson said: ‘This is a remarkable spike in inflation at the start of lockdown. Prices up 2.4 per cent in a month.
‘We use scanner data to see exactly what happened. In large part driven by a big drop in special offers like buy one get one free which are not captured in official statistics.’
IFS director Paul Johnson said the inflation was ‘in large part driven by a big drop in special offers like buy one get one free which are not captured in official statistics’
A major cause was likely to be a massive decline in the number of promotions being offered by retailers, the Institute for Fiscal Studies (IFS) said today.
Although there was a ‘modest’ drop in prices in the weeks after the hike, prices remain well about their pre-pandemic level, the report found.
The increase of 2.4 per cent was more than ten times the increase in consumer price inflation in the preceding months, it noted.
‘In the first three months of 2020, month-to-month inflation is close to zero and similar to previous years,’ the report found.
‘However, in the month 18 March to 17 April, there is a large increase in inflation of 2.4 percentage points.
‘This is unprecedented across all comparison years. In the month 18 April to 17 May, there is modest deflation, though prices remain well above their pre-lockdown level.
It added that ‘the share of transactions on promotion in 2020 dropped by around 15 per cent from the beginning of lockdown’.
A second report found that ‘over half of this increase (in prices) stems from reduced frequency of promotions.’
GDP plummeted by more than a fifth in the first month of lockdown, and has now contracted by 25 per cent since February. In this chart, 100 represents the size of the economy in April 2016
Measured quarter on quarter, growth between February and April was down 10.4 per cent. During the Credit Crunch the maximum single-quarter fall was 2.1 per cent
‘This reduction in the promotion frequency is one possible driver of higher average prices and any associated inflation.’
It came as the UK economy shrank by an astonishing 20.4 per cent in April – the biggest fall ever – as coronavirus wreaked havoc.
GDP plummeted by more than a fifth in the first full month of lockdown, following a 5.8 per cent slump in March, which was in itself a record.
UK plc has now contracted by 25 per cent since February – with the country facing the worst recession in 300 years, when the Great Frost laid waste to Europe.
The eye-watering reduction, even worse than predicted by analysts, shows the scale of the devastation being inflicted on the economy by lockdown and will heap pressure on Boris Johnson to find a way to ease the draconian curbs.
Cabinet ministers including Chancellor Rishi Sunak and swathes of Tory MPs are demanding he relaxes the two-metre social distancing rule strangling the hospitality and retail sectors.
Construction was the hardest hit in April, with a dive of more than 40 per cent. Manufacturing was down 24.3 per cent and the powerhouse services sector was 19 per cent in the red.