Asda, Britain's third largest supermarket group, has frozen the prices of over 500 products until the end of August, it said on Tuesday, adding to signs that a surge in food inflation is set to abate and even reverse in the coming months.
The price freeze by Asda, which trails market leader Tesco (TSCO.L) and No. 2 Sainsbury's (SBRY.L), includes branded products such as Kellogg's (K.N) cornflakes and Premier Foods' (PFD.L) Oxo beef stock cubes as well as own brand products such as salads, burgers and ice cream.
The move follows recent steps by grocers to cut the prices of items that have seen the sharpest rises, such as milk, butter, bread, pasta and vegetable oil.
On Monday, upmarket supermarket Waitrose reduced the price of more than 200 products.
Prime Minister Rishi Sunak has set a 2023 target to halve overall inflation but the goal has been undermined as inflation has remained stubbornly high, particularly food inflation.
Overall UK consumer price inflation ran at 8.7% in April, the most recent official data showed, while food and drink inflation was 19.1%, just below a 46-year high.
Grocery inflation eased slightly to 17.2% in May, industry data showed.
Food retailers have said they expect prices to rise in 2023 overall but with the rate of inflation declining through the year.
Shore Capital analyst Clive Black expects disinflation to be the key force through 2023 rather than deflation, noting easier commodity prices but still high energy, labour, and packaging costs.
He also believes the time frame for grocers' cost recovery, which embraces contracts, hedges, and the negotiation process, is underestimated by many observers.
Last week the French government secured a pledge from 75 top food companies to cut prices on hundreds of products.
Last month, British finance minister Jeremy Hunt met food manufacturers to raise concerns about the surge in food prices, but no formal price controls were proposed.
More light will be shed on the inflationary outlook when Tesco updates on quarterly trading on Friday and when market researcher Kantar provides its latest reading on June 20.
