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Sales of groceries in Britain are not keeping pace with inflation as shoppers cut back in austerity climate. (Jupiterimages/Getty Images/Comstock Images)
Sales of groceries in Britain are not keeping pace with inflation as shoppers cut back in austerity climate. (Jupiterimages/Getty Images/Comstock Images)

Cash-strapped Britons cut back in the grocery aisle Add to ...

Britons have been cutting back on groceries, data showed on Tuesday, adding to signs of a rapid deterioration in consumer confidence which analysts fear could derail an economic recovery.

Market researchers Kantar Worldpanel and Nielsen reported small rises in grocery sales over recent weeks.

The increases were less than their measures of food price inflation, suggesting shoppers are buying fewer goods.

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Nielsen also said promotions accounted for a record 40 per cent of sales, underscoring cash-strapped shoppers are hunting for the best deals.

"Shoppers are really feeling the pinch," said Mike Watkins, Nielsen's senior manager of retail services.

A string of British retailers have reported a slowdown in demand since the start of the year as prices climb and government austerity measures bite.

Weaker-than-expected sales from supermarket group J Sainsbury last week sent shock waves through the sector as grocers are viewed as among the most resilient retailers because of their focus on essential items.

While Britain's manufacturing industry is showing a healthy recovery, economists fear a deterioration in consumer spending, which accounts for about two-thirds of gross domestic product, could put the brakes on growth.

All is not lost, according to Shore Capital analyst Clive Black, who pointed to the prospect of a triple retail boost in April from Mother's Day, Easter and a royal wedding.

But he warned a weaker pound could drive inflation higher, leading to interest rate rises, and that unemployment could continue to climb.

Having cut sales forecasts for J. Sainsbury PLC and Wm Morrison Supermarkets PLC, Mr. Black said reductions could be in store for wholesaler Booker, which has a trading update on Thursday, and Tesco PLC, with results on April 19.

Kantar and Nielsen said hard discounters Aldi and Lidl, which enjoyed soaring sales at the start of the recession in 2008-9, were once again seeing sales growth of over 10 per cent.

However, they were seeing existing shoppers spend more with them rather than a big influx from rivals, Kantar said.

Analysts have also said they could be benefiting from disruption at discount rival Netto, which is in the process of being bought by Wal-Mart's Asda chain.

Kantar said grocery sales rose 2.6 per cent year on year in the 12 weeks to March 20, down from 3.9 per cent in the 12 weeks ending Feb. 20.

Grocery price inflation was 4 per cent, ahead of market growth for the first time since July of 2009, it added.

Nielsen said grocery sales rose 2 per cent year on year in the four weeks to March 19, almost half the rate of the previous four weeks, with inflation up at 4.5 per cent.



Reuters

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