UK shop prices have dropped year on year for the first time since the cost of living crisis began nearly three years ago, according to new data. Prices fell 0.3% in the first week of August compared with the same period last year, driven by discounts on clothing and household goods as retailers sought to shift unsold summer stock.
The decline marks the first period of price deflation since October 2021, according to the British Retail Consortium-NielsenIQ shop price index. Non-food products saw the biggest falls, with clothing and footwear discounted heavily for the eighth consecutive month. Electronics prices also dropped as tech costs came down to more affordable levels.
Food inflation eased to 2% in August, the slowest increase since November 2021. Fresh food prices, particularly fruit, meat and fish, saw their biggest monthly decrease since December 2020, falling 1% year on year. However, shelf-stable foods like tinned goods, crisps, teabags and biscuits rose by 3.4%.
Helen Dickinson, chief executive of the British Retail Consortium, said the discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch. She noted that retailers would continue to work hard to keep prices down, but warned that future prices could rise due to climate impacts on harvests and conflicts in the Middle East and Ukraine.
The Office for National Statistics reported that UK inflation rose to 2.2% in July, its first increase since December last year, and is expected to remain above the government's 2% target for the rest of the year. The Bank of England has forecast inflation could peak at around 2.75% before falling back, though there is speculation of further interest rate cuts when the Monetary Policy Committee meets in September.
