Broker snap: Supermarkets to be hit by food price deflation

2nd Oct 2009 12:51

Food price deflation is about to put a dent in the earnings of the major UK supermarkets if the experience of their US counterparts is anything to go by, reckons Citigroup.The US bank has slapped sell recommendations on Tesco, Sainsbury and Morrisons. Citi said high hopes at the beginning of the year for strong earnings growth at US food retailers Safeway, Supervalu and Krogers proved misplaced, as food prices tumbled, and the same thing could happen here.Citi is predicting a significant fall in food prices in September and reckons annual food price inflation will turn negative by the end of the year; back in February, the food price inflation rate was 11.4% in February.