Retail prices still falling although deflation is decelerating

Fierce competition between retailers has seen shop prices fall once again, although deflation has decelerated on last month, figures show.

Overall shop deflation slowed to 1.6% in July from 2% in June, above the 12-month average of 1.8%, according to the BRC-Nielsen Shop Price Index.

The battle for grocery shoppers saw food deflation remain at 0.8% for the second consecutive month.

Shoppers will have found fresh food prices 1.2% down on the same time last year, while ambient food was cheaper for the first time since April 2015.

Non-food deflation decelerated to 2.2% in July from 2.8% in June.

Shoppers have now been able to fill their baskets and pay less for their goods than the year before for 39 months in an "extraordinary" run of overall shop price deflation.

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.

"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. 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 under way, 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."