In the UK, shop prices have fallen for the first time since the cost of living crisis began nearly three years ago, as food inflation eased and retailers offered discounts on clothes and homewares to get rid of their unsold summer stock.

New data shows that prices fell 0.3 percent in the first week of August compared to the same period last year. In July they were up 0.2 percent, and the three-month average was 0 percent.

According to the British Retail Consortium-NielsenIQ retail price index, this is also the first period of price deflation – that is, the reduction in the prices of goods and services – since October 2021.

The decline was due to falling non-food prices as retailers began to strategically discount their goods. Stores have been trying to shift their stocks after a tough summer in which consumers were less willing to brave cold and rainy weather to hit the high streets and less inclined to buy summer clothes. Retailers have also been trying to figure out how to boost spending while households are still struggling with high living costs.

British Retail Consortium (BRC) chief executive Helen Dickinson said the change was “due to deflation in the non-food sector as retailers sell off their summer stocks, particularly in fashion and homeware, at deep discounts”.

“These price reductions followed a difficult summer of trading caused by bad weather and the ongoing cost of living crisis that affected many families,” she said. “Food inflation eased, with prices of fresh food, particularly fruit, meat and fish, recording their biggest monthly decline since December 2020 as suppliers’ input costs fell.”

Clothing and footwear were among the most heavily discounted products. In August, prices fell for the eighth month in a row due to weaker demand. Electronics products were also a driver of price deflation, as prices for technology products fell to more affordable levels after several years of rising prices, according to the BRC.

Food prices continue to weigh on household finances, rising 2 percent in August compared to the previous year.

However, this was the smallest increase since November 2021. While the cost of long-life foods such as canned goods, chips, tea bags and biscuits rose by 3.4%, the cost of fresh foods such as fruit, meat and fish fell by 1%, marking the biggest monthly decline since December 2020. According to the BRC, this was partly due to cost relief for food producers.

Dickinson said: “Retailers will continue to work hard to keep prices low and households will be happy that prices for some goods have fallen into deflation.”

However, the future remains uncertain, with the BRC warning that retail prices could still rise in the coming months as the impact of climate change on crops and conflicts in the Middle East and Ukraine push up the cost of goods and fuel.

According to the Office for National Statistics (ONS), food costs have risen by 32.6 percent since the Russian invasion of Ukraine in February 2022, while gas prices have increased by 68 percent and electricity prices by 45 percent.

The BRC’s warning comes after the ONS reported that the UK’s annual inflation rate rose to 2.2% in July – the first increase since December last year – and said it was expected to remain above the government’s 2% target for the rest of the year. The rise was due to household energy bills, which fell less last month than they are expected to in July 2023.

The Bank of England also said earlier this month that it expects the consumer price index, which measures inflation, to continue to rise and peak at around 2.75% before falling back. However, there is still speculation that the bank could cut rates again when its monetary policy committee meets in September. The committee cut borrowing costs to 5% from 5.25% earlier this month.