British shoppers have reason to celebrate as deflation reached its highest level since records began in 2006.
Not only have prices fallen for 15 consecutive months, but they appear to be accelerating – deflation rose by 0.1 per cent month-on-month from 1.8 per cent in June.
The June BRC-Nielsen shop price index found that whilst it is the prices of non-food goods which continue to account for the overall deflation (still very much in the red at -3.3 per cent) it was the decrease in food inflation which accounted for the recent acceleration.
The supermarket price war looks set to continue as food inflation has fallen to just 0.3 per cent year on year, half of the already small figure recorded in June. Fresh food inflation fell to 0.3 per cent (well below the 1.5 per cent yearly average) whilst the Ambient food category dropped dramatically from 0.7 per cent to 0.2 per cent in July alone.
In contrast non food goods actually reported a recent decrease in deflation, rising from -3.4 per cent to -3.3 per cent in the past month. The accelerated deflation from the Furniture & Floorcovering, Electricals and DIY, Gardening and Hardware sectors was counterbalanced by the decelerated deflation which came from the Clothing and Footwear area.
British retail consortium director general, Helen Dickinson believes the benefits will be the largest for shoppers on the lowest income. “Shop price deflation deepened still further in July and marked fifteen consecutive month of falling shop prices for consumers. This is great news for households who are benefiting from fierce competition within the industry at a time when disposable incomes remain under pressure.
“The lowest ever recorded food inflation will be particularly welcomed by the lowest income households who typically spend around a third of their expenditure on food. Deep and widespread discounting across the grocery sector is intensifying with prices falling almost one per cent month-on-month – another record jump. After accounting for the use of multi-buys and vouchers, food prices are falling.”
Mike Watkins, head of retailer and business insight, Nielsen, said: “There is very little food inflation at the moment and this looks set to continue over the summer. Many supermarkets are reducing prices across ambient and seasonal fresh foods, which is helping shoppers make further savings on household bills.
“And on the non-food high street, retailers are maintaining the level and depth of price cuts and promotions to help drive footfall over the holiday period.”
