Weak confidence around personal finances and a squeeze on disposable income will hold back growth in food retail sales to around 5 per cent in 2023, lagging inflation and December's growth rate, data from market researcher NielsenIQ showed on Tuesday.
In November, the Bank of England forecast Britain was heading into a long recession, with inflation, running at 10.7 per cent, not returning to its 2 per cent target until early 2024. The government's budget watchdog predicted the biggest squeeze on living standards since records began in the 1950s.
"We also expect the recession to start to influence shopper behaviour and reframe overall retail spend," Mike Watkins, NielsenIQ's UK head of retailer and business insight said on Tuesday.
He said 2023 will be tough for UK households as 33 per cent only have enough money for essential spending with just 5 per cent able to spend freely. Consumers in the middle are those that live comfortably but still watch their wallets.
NielsenIQ said UK grocery sales rose 10.9 per cent in the four weeks to Dec. 31 year-on-year, masking a drop in volumes when accounting for inflation.
It said supermarkets benefited from very cold weather in early December and also from continued rail disruption due to labour strikes. Both held back spend in the hospitality channels helping food retailers to gain "share of calories consumed" from the out-of-home channels.
Echoing data from rival market researcher Kantar published last week, NielsenIQ said discounters Aldi UK and Lidl GB were the best performers with sales growth of 19.3 per cent and 15.7 per cent respectively over the 12 weeks to Dec. 31.
Of Britain's traditional major supermarket groups, No. 2 player Sainsbury's was the best performer with sales up 8.5 per cent over the 12 weeks, followed by market leader Tesco with an 8.0 per cent sales increase and No. 3 Asda with sales up 7.9 per cent. Morrisons was the laggard with sales falling 1.1 per cent.
Marks & Spencer also performed well with sales up 9.0 per cent.
Tesco, Sainsbury's and M&S are all due to update on Christmas trading this week.
NielsenIQ said that while online sales rose 2.8 per cent in December, its share of the grocery market fell to 10.4 per cent, versus 11.2 per cent a year ago.
Separately on Tuesday, surveys from Barclays and the British Retail Consortium showed overall British consumer spending in December lagged inflation, representing a sizeable fall in real-terms expenditure, despite contributions from Christmas shopping and the men's soccer World Cup.
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