- Retailers offered deep discounts on clothing and home goods.
Prices in stores fell for the first time in nearly three years after retailers offered deep discounts on clothing and home goods.
The new figures show that shop prices fell 0.3 percent in August, following price growth of 0.2 percent in July and below the three-month average rate of 0 percent.
This is the first period of price deflation (where there is a general fall in the price of goods and services below inflation) since October 2021, according to the British Retail Consortium-NielsenIQ shop price index.
Discounts fuel deflation: Retailers cut costs on clothing and household items over the summer
Price deflation was driven by non-food items, which fell 1.5 percent in August, after a 0.9 percent drop in July, with retailers “discounting heavily” to move their summer stock after a period of bad weather.
Food inflation fell from 2.3 percent to 2 percent between July and August, its biggest monthly drop since December 2020, as input costs from suppliers declined.
Prices of fruit, meat and fish have fallen, bringing overall food inflation to its lowest level since November 2021.
Fresh food inflation slowed to 1 percent in August, reaching its lowest level since October 2021, while pantry staples saw inflation slow from 3.6 percent to 3.4 percent between July and August.
BRC chief executive Helen Dickinson OBE said: “Shop prices fell into deflation for the first time in almost three years. This was driven by non-food deflation as retailers discounted heavily to sell off summer stock, particularly on fashion and homeware.
‘This discount came after a difficult summer trading period caused by bad weather and the continuing cost of living crisis that affected many families.’
Despite the fall in prices, the BRC warned that they could rise in the coming months as the impact of climate change and conflicts in Ukraine and the Middle East push up the cost of goods.
Dickinson said: ‘Retailers will continue to work hard to keep prices down, and households will be happy to see that prices of some goods have fallen into deflation.
‘The outlook for commodity prices remains uncertain due to the impact of climate change on domestic and global harvests, as well as rising geopolitical tensions. As a result, we could see renewed inflationary pressures over the coming year.’
Earlier this month, figures from the Office for National Statistics showed the inflation rate had risen for the first time this year, from 2 percent to 2.2 percent.
While the headline rate has risen, there has been a slight decline in core inflation, from 3.5 percent to 3.3 percent, which is a positive sign, and the widely expected increase came after gas and electricity prices fell less than they did in 2023.
ONS figures show headline food inflation is at 1.5 per cent, driven by a downward effect from a combination of bread and cereals, fish, vegetables, mineral waters and soft drinks.
The Bank of England expects inflation to continue to rise to 2.75 percent before falling below its 2 percent target in 2025.
However, there is speculation that the central bank could cut rates again when it meets in September, after having reduced the base rate from 5.25 percent at its last meeting earlier this month.