Consumer spending is expected to remain “robust” over the summer but shop prices have fallen for the 26th consecutive month.
Overall prices across all sectors fell by 1.3% in June, the latest BRC-Nielsen index revealed. However this was a slowdown on deflation of 1.9% in May.
Food deflation slowed slightly to 0.4% from its record low rate of 0.9% in May, mostly due to the rebound of oil prices.
Non-food deflation slowed to 1.9% in June from 2.5% the previous month. It was the 27th month of non-food deflation.
On a 12-month basis shop prices are down by 1.7%.
Mike Watkins, Nielsen’s head of retailer and business insight, said: “Retailers continue to use price cuts and promotions to stimulate sales, which is helping to maintain shop price deflation, and we see little evidence to suggest that prices will rise in the near future.
“With many food retailers still using price cuts to attract new shoppers, this is lowering the cost of the weekly shop and so the overall CPI figure in the UK. Deflation and price led competition will continue to be a key driver of sales growth for some time yet.”
BRC director-general Helen Dickinson added: “Consumer confidence hit a 15-year high which suggests that shoppers will feel more comfortable about buying major purchases. It also suggests that consumer spending, one of the main drivers of the recovery, should remain robust over the summer.”
Dickinson said in particular there were deals for shoppers in furniture and flooring and gardening and hardware.
She added: “We’re seeing a strong appetite for consumer credit, inflation remains at an historic low, unemployment continues to fall and wages have started to rise, the wider macro-economic data continues to be supportive for the consumer.’’