Sainsbury's has to battle chill economic wind blowing through Britain

If Sainsbury’s found 2016 “challenging” - the supermarket chain has just reported an 8 per cent fall in profits - what does that say about the current year?

Thanks largely to the acquisition of Argos - a deal that looks better and better - sales grew by 12.7 per cent across the group.

But profits dipped to £503m, and they will fall again this year. With Brexit starting to bite, gravity is weighing heavily upon consumer confidence.

Argos, a business that was on its knees when Sainsbury boss Mike Coupe swooped to buy it, has been flying under the grocer’s stewardship and he target to reap £160m from the deal has been brought forward by six months.

Targets for deal based "synergies" like that are always set to be beatable. More significant is the company’s decision to bring forward the opening of 250 Argos outlets in Sainsbury’s supermarkets.

As one analyst noted, Argos was in need of a lifeboat when Sainsbury’s bought it. Now it could be said to have become one for its new owner.

The fly in its ointment is aforementioned consumer confidence. Rising prices, concern over a slowing economy, sluggish wage growth where wages are even growing, all that and the self inflicted wound of Brexit (the chief cause of those rising prices).

All will make it harder for Argos in the months ahead, even with if you take into account the good work Sainsbury’s has done. Now is not the time to be buying what Argos sells, if you can avoid it.

If thinks look dicey in general merchandise, what about food? Here the outlook is similarly difficult. Sainsbury’s is faced with the continued revival of Tesco and Morrisons, Aldi and Lidl are still opening stores, and so is the Co-op. Even Asda is showing glimmers of life. At least its sales have stopped falling.

Then you have to remember the impact of that inflation. Faced with a squeeze, price becomes an even more important determinant for shoppers than it was.

Sainsbury’s has never been the cheapest supermarket. That’s why its bosses are so fond of banging on about their values. Values, however, can go hang for shoppers who are feeling the squeeze and that might well translate into a Sainsbury’s squeeze, even if those new Argos outlets drive football.

It's not an attractive prospect if you’re an investor.

The latest figures from Kantar do contain hopeful signs for Sainsbury’s, in fact for all the supermarkets. They show all 10 major ones in growth for the first time in three-and-a-half years. That was when, as Kantar's head of retail Fraser McEvitt notes, we last saw like-for-like grocery inflation as high as it is now.

At Sainsbury’s they point to a sales rise of 1.7 per cent, which is very creditable, and the greatest Kantar has seen since June 2014, with growth coming from all three channels (convenience stores, larger supermarkets and online).

But can that growth continue as inflation and low wage growth eat into the pound in the shopper’s pocket? It tells you all you need to know about the current market that it will be a stunning achievement for Mr Coupe and his team just to have Sainsbury’s treading water by this time next year.