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Shoppers turn to packed lunches to keep budgets in line - as grocery price inflation 'remains high'

Shoppers are turning to packed lunches in an attempt to try and keep their budgets in line, with 86 million more lunchboxes brought to work and school last year, new research suggests.

Spending on alcohol also fell by more than half in January compared with December - with people taking part in Dry January and other health challenges, according to industry data.

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It comes as figures show the recent trend of a gradual easing in grocery price inflation was effectively halted in January as retailers reined in special offers after Christmas.

Kantar Worldpanel, which tracks sales among chains, said the rate of annual price rises for food, drink and other household essentials remained high at 6.8% during the four weeks to 21 January.

It represented a drop of just 0.1% on December's grocery inflation rate of 6.9%.

However, separate figures from the British Retail Consortium (BRC) - a trade association which represents supermarkets - and NielsenIQ, also out on Tuesday, are more upbeat.

Their research suggests shop price inflation - which includes both groceries and non-food items like clothes - fell this month to its lowest level since May 2022.

BRC chief executive Helen Dickinson said the drop was driven mostly by offers on non-food items. However, a drop in the price of tea and milk was also said to be a factor.

The pace of grocery price rises - and the more general consumer price index (CPI) of inflation - had been declining towards the end of last year.

But CPI surprisingly went up earlier this month, and there has been growing concern that prices will soon be hit by disruption to supply routes in the Red Sea, amid attacks on shipping linked to the Israel-Hamas war.

However, Kantar's head of retail and consumer insight Fraser McKevitt said its latest figures were "more about the battle between the supermarkets to offer best value, rather than geopolitics".

He said: "Retailers have taken their foot off the promotions gas slightly as we've come into the new year, and that's meant inflation hasn't fallen as quickly.

"Items bought on offer accounted for 27% of all grocery spending in January versus 32% last month.

"Christmas is always a bumper period for deals and the grocers pulled the price lever especially hard in December, as they sought to get shoppers through their doors."

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Kantar said Britons were continuing to trim costs and keep an eye out for offers while inflation remained "stubbornly high".

Mr McKevitt said: "There's still plenty of opportunities for consumers to make savings. The overall trend in offers is up versus this time last year, and nearly £500m more was spent on offers this January than in the same month in 2023."

In addition, Researchers also said "Veganuary" could be responsible for an 8% increase in sales of own label plant-based ranges.

However, despite grocery inflation remaining high, the pace of price rises is less than half of what it was a year ago, when Kantar's rate for January was 16.7%.

Meanwhile the BRC and NielsenIQ said shop price annual inflation eased to 2.9% in January, down from 4.3% in December - the lowest since May 2022.

The researchers also said food inflation eased from 6.7% in December to 6.1% in January.

Mike Watkins, head of retailer and business insight at NielsenIQ, said: "Shoppers are seeing savings at the checkout with non-food retailers on promotion and food retailers continuing to reduce prices when the costs of goods fall.

"However, consumer demand remains fragile as most households are yet to feel better off after nearly two years of inflation."