UK shop price inflation slows to 1 per cent in July

Lowest rise in food inflation since 2010.

Food for thought: a Tesco supermarket in London. Credit: Getty Images

Overall shop price inflation in the UK slowed to 1 per cent in July from 1.1 per cent in June, according to figures released today by the British Retail Consortium (BRC) and Nielsen.

Food inflation fell to 3.1 per cent in July from 3.5 per cent the previous month, marking the lowest rise since 2010. Deflation in non-food items was unchanged at 0.3 per cent in July.

Stephen Robertson, director-general of BRC, said:

A two-year low for food inflation is good news for hard-pressed households still suffering falls in disposable incomes. Lower shop price inflation is helping to narrow the gap between living costs and wage increases.

Extra promotions, particularly linked to party food and this summer's big events, are combining with past falls in commodity prices, which are working their way through to shop prices.

But the relief may not last. Poor harvests, especially of corn and wheat in the US, are creating a build-up of inflationary pressure. Animal feed has risen sharply in recent months and is likely to affect prices for things like meat, poultry and eggs.

Overall, non-food goods were cheaper than a year ago for a sixth month as retailers discounted to generate sales. Great news for customers who have spare money to spend on clothing, electricals and furniture. But many don't have money available or the confidence to spend even with prices down.

Mike Watkins, senior manager of retailer services at Nielsen, said:

Over the last few months, we have seen difficult trading conditions due to the unseasonable weather. In food, promotions remain close to an all-time high and the focus on price cuts and the use of vouchers or coupons continues as consumer demand is unpredictable.

So, shoppers are seeing a double benefit as external cost price pressures have also eased a little which contributed to a further slowing in shop price inflation in July. Once back from their summer holidays, we expect consumers to still be cautious about big ticket or discretionary spend, which is why there is no upward pressure on non-food prices at the moment.

The BRC-Nielsen shop price index is a monthly measure of UK shop price inflation. It measures changes in the price of 500 of the most commonly bought items.