Shop prices fall 0.5% in August driven by 'widespread' discounting

The rate of decline remains unchanged from July, and was driven by “widespread” promotions in fashion, electricals and health and beauty.

Food inflation rose to 2.5% in August from 2.2% in July, while non-food deflation fell to 2.3% from 2.1% in July, according to the British Retail Consortium (BRC)-Nielsen Shop Price Index.

BRC director general Helen Dickinson said: “This is the highest August deflation since our records began, and in line with the previous month’s total which showed the biggest drop for six and a half years. 

“A further fall in prices pushed non-food deflation to its lowest rate since December 2008. Discounts and promotions continue to be widespread for fashions and electricals, and health and beauty deflation is at a near five-year high thanks to an abundance of good deals on toiletries and cosmetics.”

She added: “Food inflation has edged up marginally in August after the previous month’s three-year low, as a result of fresh food prices going back in line with the June rate after extensive promotions on salads and summer fruit and veg caused a dip in July.

“There may be some pressures in the pipeline, but I would expect prices to remain fairly stable barring any major shocks in the supply chain.  These figures certainly add to the recent run of rosier news, and confirm that retailers are working hard to offer customers the best possible value on their shopping.” 

Non-food deflation was dragged down by defaltion acros the furniture and floorcoverings and electricals categories, both of which recorded a sharp increase in deflation. All non-food categories took advantage of a lift in consumer confidence by using promotions and discounts to entice them in, while health and beauty reported its first fall in prices since 2008.

The slight rise across food prices was driven by fresh food where inflation grew 0.8% to 2.8% in August. The BRC said, this was due to a fall in promotional activity on seasonal items, particularly meat, vegetables and fruit, all of which reported an acceleration in their inflation rates after slipping back in July

Nielsen head of retailer and business insight Mike Watkins said: “The good news for shoppers is that many high street and non-food retailers have been holding back on price increases during the summer and even with some seasonal fresh food inflation in August, overall shop price inflation at supermarkets is still at one of the lowest levels for three years.”  

The index said commodities were under pressure in August as the conflict in Syria has caused prices of crude oil to rise to a six-month high before falling back. In addition, the hot weather in the midwest region of the US has pushed grain prices higher, while some forecasters are concerned that yields could fall as the heat damages crops.