• Overall shop prices in July were 1.6% lower than a year ago
  • Non-food deflation slowed to 2.2%, according to the BRC and Neilson shop price index
  • Food prices fell by 0.8%, which is the same rate as the month before

The trend for deflation continued in July but the price of goods in shops fell at the slowest rate since August last year.

Overall shop prices were 1.6% lower in July than they were a year ago, according to the BRC and Nielsen shop price index.

Nielsen said “unpredictable weather” and ”a change to consumer sentiment” have driven retailers to cut prices or increase promotional activity in the last few weeks to assist sales growth.

However, the price drop is shallower than the 2.0% decline in June, and below the 12-month average of 1.8%.

Non-food deflation slowed to 2.2% in July, compared with the 2.8% in June, but food prices fell at the same rate as the month before, remaining at near-record levels of 0.8%.

Year-on-year, the price of fresh food has fallen 1.2%, and ambient food was cheaper in July for the first time since April 2015.

BRC chief executive Helen Dickinson said the deflation is “testament to the strength of competition between retailers, which is as fierce as it has ever been”.

She said: “While we may have become accustomed to prices falling, it’s worth noting that this month’s figures have seen the rate of deflation decelerate.

“It’s too early to say if this is the beginning of the end of sustained price deflation or whether pressures in the wider economy could merely mark the end of the beginning.”

Nielsen UK head of retailer and business insight Mike Watkins said: “Once again it is clear there is currently no inflationary pressure coming from retail and discounting looks set to be a catalyst to stimulate demand in the coming months.”

Earlier this week, Morrisons unveiled plans to slash the price of more than 1,000 products by an average of 18%.

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