Shop price inflation falls to lowest rate in more than two years

Food inflation fell from 4.3% in May to 3.5% in June - a 23-month low as both fresh and ambient food categories delivered a sharp deceleration as falls in commodity prices allowed retailers to lower prices.

Deflation in non-food was up to 0.3% in June from 0.1% in May, as promotional activity increased due to many retailers beginning their summer sales. Prices fell month-on-month across clothing, footwear and electricals.

In DIY, gardening and hardware inflation sharply decelerated to a three-year low as retailers increased promotional activity in the face of dampened sales in the wet weather.

BRC director general Stephen Robertson said: “Overall shop price inflation is at its lowest for two and a half years. This is good news all round for hard-pressed customers and shows retailers holding back prices as commodity cost pressures ease.

“Crude oil prices are down a quarter on three months ago with food commodities, such as coffee and sugar, falling sharply over the same period. In a highly competitive market, retailers are rushing to reflect those drops in good deals for customers.

“At the same time, weak consumer demand continues to drive deep and heavily targeted discounting, particularly among non-food goods.

“With real disposable incomes still dropping, let’s hope there’s more downward pressure to come from past falls in commodity prices working through to inflation.”   

Nielsen senior manager, retailer services Mike Watkins added that this summer’s events may drive shopper spend.