Food prices up but clothes shops shift stock with discounts

Annual food prices have risen for the second month in a row but intense competition among other retailers spelt better news for consumers, figures show.

The BRC-Nielsen Shop Price Index shows food prices rose year-on-year by 0.2%, up marginally from 0.1% in July, after falling every month for the first half of the year.

A fierce supermarket price war has pushed down the cost of groceries for consumers. Food deflation reached 0.9% in March and remained there for the following two months, according to the index. The decline narrowed to 0.4% in June.

BRC director general Helen Dickinson said the rise in August was "once again marginal" and likely to be a temporary fluctuation in a longer term downward trend driven by ongoing competition.

It came as the wider index showed its 28th consecutive month of deflation, at 1.4%, unchanged from July but a deepening of June's 1.3%.

Non-food inflation was at minus 2.4% in August, compared with 2.3% in July and 1.9% the month before.

Ms Dickinson said: "Clothing retailers discounted heavily in an attempt to shift stock with prices falling on average by 5.4%."

Great deals could be found in books, stationery and home entertainment as prices throughout the category fell on average by 5.2%, the report said.

Food inflation returned as fish, fruit, convenience food and vegetables recorded price rises.

The report said a "relatively benign" economic environment and a fiercely competitive market would see retailers continuing to respond with prices and promotions to maintain market share.