Shop prices lowest on record due to supermarket price war

The British Retail Consortium (BRC) Nielsen Shop Price Index said deflation accelerated from a 1.4% fall in May.

Food inflation slipped 0.6% in June and non-food deflation accelerated to 3.4% from 2.8% in May – both the lowest ever recorded rates.

BRC director general Helen Dickinson said: “Fierce competition among grocers has driven food price inflation to record low levels and with some grocers having announced plans to keep prices down, consumers stand to benefit for a while to come. While sports fans are doing well this summer with great deals to be found in Clothing, Footwear and Electricals.”

The Big Four grocers have triggered a renewed price battle in recent months as discounters Aldi and Lidl have been gaining market share. Fresh food inflation is 0.6%, below the twelve-month average of 1.6%. Ambient food inflation fell from 0.9% to 0.7% in June.

Meanwhile, all non-food categories experienced deflation, excluding health and beauty. Clothing reported its lowest ever deflation, as retailers slashed prices for the summer Sales, while electricals retailers also went on promotion to drive sales of televisions ahead of the World Cup and Wimbledon.

Dickinson added that the outlook was positive for retail with consumer confidence at its highest since 2005, stable commodity markets and the strengthening of sterling.

Nielsen head of retail and business insight Mike Watkins said: “Little in the way of immediate seasonal or weather-related price increases is anticipated so the outlook for the next three months is for relatively stable shop price inflation. Helped by the increases in consumer confidence since the start of the year, this should encourage shoppers to spend more freely over the summer months.”