Shop price inflation hit its lowest levels seen all year in July, despite food prices remaining stubbornly high.

Supermarket shoppers

Food inflation decelerated to 13.4% in July, down from 14.6% in June

Annual shop prices decelerated to 7.6% in July – down from 8.4% in June – according to the BRC-NielsenIQ shop price index. This was below the three-month average inflation rate of 8.4% and down to its lowest level seen in 2023.

Prices deflated across categories, with food inflation decelerating to 13.4% in July, down from 14.6% in June. This was below the three-month average and the third consecutive month of falling prices.

Food inflation fell to 14.3% in July, down from 15.7% in June, and ambient food came down to 12.3% during the month, down from 13% in June.

While food prices have dipped to their lowest levels since December 2022, they still remain at historic levels and the British Retail Consortium (BRC) warned of further supply chain issues on the horizon, which might add to input costs.

“Shop price inflation fell to its lowest level of 2023 and, for the first time in two years, prices fell compared to the previous month. Leading the cuts was clothing and footwear, where retailers mitigated wet weather with larger discounts,” said BRC chief executive Helen Dickinson.

“Food price inflation also slowed to its lowest level this year, with falling prices across key staples such as oils, fats, fish, and breakfast cereals.

“These figures give cause for optimism, but further supply chain issues may add to input costs for retailers in the months ahead.

“Russia’s withdrawal from the Black Sea Grain Initiative and subsequent targeting of Ukrainian grain facilities, as well as rice export restrictions from India, are dark clouds on the horizon. We expect some global commodity prices to rise again as a result and food prices will be slower to fall.

“Retailers continue working hard to keep falling prices on track. Government must also play its part and freeze business rates from next April or else risk adding a £400m additional pressure on prices.”