Food deflation continued in July, new Nielsen/BRC figures reveal

Food deflation remained at 0.8% in July for the second consecutive month, with overall shop prices down 1.6% year on year, according to the latest British Retail Consortium – Nielsen Shop Price Index, published today.

Fresh food deflation slowed a little, to 1.2% in July from 1.5% in June, driven by vegetables, fruit, and oils and fats. However ambient food experiencedt annual deflation for the first time since April 2015, with prices down 0.1%.

British Retail Consortium chief executive Helen Dickinson attributed the “long stretch of deflation” to the strength of competition between retailers, particularly the established supermarkets and discounters like Aldi and Lidl.

“In food retailing, the battle for our custom has seen yet more deflation at near-record levels. Shoppers will have found fresh food prices 1.2 per cent down on the same period last year and ambient food was cheaper for the first time since April 2015,” Dickinson said.

However, she pointed out that this month’s figures have seen the rate of deflation decelerate.

“Total price falls have slowed to -1.6% from June’s -2.0%. 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,” she added.

Nielsen’s head of retailer and business insight Mike Watkins added that the soggy summer and a cooling of confidence post-Brexit may have had an effect: “With unpredictable weather and a change to consumer sentiment underway, 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.”

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