Competition continues to drive price falls

Overall shop prices reported deflation of 1.6 per cent in July, from the 2.0 per cent decline in June, which is above the 12-month average of 1.8 per cent.

British Retail Consortium/Nielsen figures showed non-food deflation decelerated to 2.2 per cent in July from 2.8 per cent in June. This is above the 12-month average of 2.8 per cent.
Food deflation remained at 0.8 per cent for the second consecutive month. Both the Fresh and Ambient Food categories reported annual deflation in July.

British Retail Consortium chief executive Helen Dickinson said: "The long stretch of deflation continued in July with shop prices falling once again. This is testament to the strength of competition between retailers, which is as fierce as it has ever been. In food retailing, the battle for our custom has seen yet more deflation at near-record levels. Shoppers will have found fresh food prices 1.2 per cent down on the same period last year and ambient food was cheaper for the first time since April 2015.

"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. Total price falls have slowed to -1.6 per cent from June’s -2.0 per cent. 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 head of retailer and business insight Mike Watkins said: "With unpredictable weather and a change to consumer sentiment underway, we have seen retailers cut prices or increase promotional activity in the last few weeks to help top line sales growth, so it is of no surprise that shop price deflation is lower in July than in any other month this year. 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."

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