Store prices were deflationary in August for the first time in nearly three years, according to new data, as retailers dramatically slashed prices on summer goods to clear inventory.
The British Retail Consortium-NIELSENIQ shop price index showed that prices fell by 0.3% in August, compared with inflation of 0.2% in the previous month. This is below the three-month average of 0.0%. Annual growth in shop prices remained at the lowest level since October 2021.
The deflationary trend came from non-food items, which fell by 1.5% in August, a further decline from -0.9% in the previous month. This is below the three-month average of -1.1%. Inflation is at its lowest level since July 2021.
“These discounts are the result of a difficult summer of trading caused by bad weather and the ongoing cost of living crisis that has affected many families,” said Helen Dickinson, CEO of BBRC.
“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.”
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Food inflation slowed to 2% in August, from 2.3% in July. This is below the three-month average of 2.%. The annual rate for food continues to decline, and inflation is at its lowest level since November 2021.
Fresh food inflation continued to slow in August, coming in at 1%, down from 1.4% in July. This is below the three-month average of 1.3%. Inflation is the lowest rate since October 2021.
Retail prices are a hot topic at the moment amid concerns that inflation could remain sluggish and exacerbate cost-of-living pressures. In early August, the Bank of England cut its benchmark interest rate for the first time in four years, reducing the base rate by a quarter of a percentage point to 5%.
There have already been concerns about energy costs, with Ofgem set to implement a 10% increase in the energy price cap in August.
Bank of England Governor Andrew Bailey said on Friday at the annual central bankers’ symposium in Jackson Hole that it was “too early to declare victory over inflation”.
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“Recent experience makes me cautiously optimistic that inflation expectations are better anchored due to the existing arrangements,” he said.
“The inflation effects of the second round appear to be smaller than expected. But it is too early to declare victory.”
The outlook for food prices is uncertain as winter begins due to the impact of climate change on domestic and international crops, as well as geopolitical tensions, Dickinson said.
“As a result, we could see renewed inflationary pressures next year,” she added.
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