CURRENT strife in the retail sector will be laid bare next week when companies including the owner of Argos and Homebase post updates.

Supermarket chain Morrisons will shed light on how consumers are reacting to higher grocery prices when it updates the market on Thursday.

The cost of food was 6.2% higher in July than a year ago, according to official figures, while alcohol and tobacco prices were up 10.3%.

With shoppers’ budgets being squeezed as wages fail to keep pace with the rising cost of living, supermarkets are having to fight hard for trade, with special offers and price cuts squeezing their margins.

Industry figures from Kantar Worldpanel showed that discounters Aldi and Lidl are thriving in the current environment, growing much faster than the rest of the grocery market.

Morrisons, which has some 450 outlets, is the only one of the big four supermarkets to have continued to grow market share in the 12 weeks to August 7, the figures show.

Its sales grew at 4.6%, faster than the overall market growth of 3.8%, boosting its share of the market to 11.7%.

Morrisons’ performance was helped by opening stores as it expands into new areas, particularly the South East, and by promotional drives, such as its Let’s Celebrate campaign around Easter and the royal wedding.

The Bradford-based chain is expected to reveal that pre-tax profits rose 7% to £440m in the half year to August 1, according to Philip Dorgan, an analyst at Panmure Gordon.

He expects like-for-like sales to have risen 1.9%, boosted by food price inflation.