Supermarkets have been told by the competition regulator they must lower prices for shoppers as costs for ingredients start to fall.

Britain’s competition watchdog warned there were “some signs” that grocers were planning to start rebuilding their profit margins, as wholesale costs for ingredients including dairy and wheat come down.

The Competition & Markets Authority (CMA) said it would be monitoring this carefully in the coming months. This would “ensure that people benefit from competitive prices as input costs fall”.

Sarah Cardell, chief executive of the CMA, said the picture was better across the grocery market than it was for fuel, where the regulator found supermarkets were overcharging drivers.

Earlier this year, the watchdog said retailers including Asda, Morrisons, Tesco and Sainsbury’s had set prices 6p higher per litre than necessary, resulting in drivers paying £900m more than they should have been on fuel.