Supermarket Price War Eases the Inflation Rate

As Aldi, Lidl and Waitrose have grabbed more and more impressive shares of the market, the main supermarkets are scrambling to gain it back with their price wars, an action which has reportedly eased the inflation rate and aided the economy.
Sky has reported that the Office for National statistics (ONS) has theorised that the dramatic drop in the annual rate of price growth from 1.8% in March down to 1.5% in May is due to the actions of the biggest supermarkets.
As Tesco, Asda, Sainsbury’s and Morrisons – collectively known as the ‘big four’ supermarkets due to their massive market shares – all reduced and altered their prices, there was an annual 0.6% fall in food prices in May, as well as a reduction in general items such as drinks and clothing.
The ONS suspects a strong link between the shops’ reductions and this overall price fall.
This is the first annual fall in food prices since 2006.
However, things still aren’t looking good for the big four supermarkets as Tesco has had its credit rating lowered by Moody’s, the credit rating investigators and agency. This highlights the economic difficulties Tesco has been going through, having reportedly seen a 6pc drop in their trading profit from 2013-14.
“We have downgraded Tesco’s rating owing to the increasingly difficult conditions in the UK retail grocery market” said the lead analyst for Tesco at Moody’s.
“We expect these conditions to continue affecting the company’s profile negatively over the next 12-18 months.”