As new figures show, retail prices are falling for the first time in almost three years.
According to an influential retail group, retailers’ drastic price cuts to get rid of their summer merchandise helped push store prices into deflation in August for the first time since October 2021.
Deflation occurs when the general price level for goods and services falls; it occurs when the inflation rate falls below 0%.
According to the Shop Price Index of the British Retail Consortium (BRC)-NielsenIQ, shop prices in August were 0.3 percent lower than the previous year.
This figure is below the inflation rate of 0.2 percent in July and below the three-month average of 0 percent.
The survey period covered the first week of August.
The overall decline was due to deflation of 1.5 percent in non-food products, which include clothing, furniture and electronics.
Helen Dickinson, chief executive of the BRC, said this reflected “the fact that retailers are offering deep discounts to get rid of their summer stock, particularly fashion and homewares”.
“These price reductions followed a difficult summer of trading caused by bad weather and the ongoing cost of living crisis affecting many families,” she said.
Meanwhile, food prices rose 2 percent in August compared to a year earlier.
Nevertheless, price increases continue to slow and this month was the lowest since November 2021.
Fresh food inflation slowed to 1% in August, with fruit, meat and fish recording their biggest monthly decline since December 2020, the BRC said.
Price inflation for long-life foods – products that can be safely stored at room temperature, such as canned goods, chips, tea bags and biscuits – remained more stubborn at 3.4%.
“Retailers will continue to work hard to keep prices low and households will be happy that prices for some goods have fallen to deflationary levels,” Ms Dickinson said.
“Due to the impact of climate change on domestic and international crop yields and increasing geopolitical tensions, the outlook for commodity prices remains uncertain.
“As a result, inflationary pressures could return next year.”
Mike Watkins, head of retail and business insights at NielsenIQ, said many grocers had introduced price cuts to boost sales during the “summer of sport” given the popularity of events such as the Paris Olympics and the Euro 2024 football championships.
