Competition continues to deflate prices across UK products, providing further confusion over the effects of Brexit and the current state of the UK economy.

A study conducted by British Retail Consortium (BRC) and Neilsen published this morning shows that deflation has continued to lower the prices of products across all sectors. 

Overall, shop prices reported deflation of 1.6 per cent this month, above the 12-month average of 1.8 per cent.

Non-food product deflation slowed to 2.2 per cent this month, again above the national average of 2.8 per cent. Food deflation remained the same for the second consecutive month at a rate of 0.8 per cent.

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“The long stretch of deflation continued in July with shop prices falling once again,” BRC chief executive Helen Dickinson said.

“This is testament to the strength of competition between retailers, which is as fierce as it has ever been.

“Shoppers will have found fresh food prices 1.2 per cent down on the same period last year and ambient food was cheaper for the first time since April 2015. While we may have become accustomed to prices falling, it‘s worth noting that this month‘s figures have seen the rate of deflation decelerate. 

“Total price falls have slowed to -1.6 per cent from June‘s -2.0 per cent. It‘s too early to say if this is the beginning of the end of sustained price deflation or whether pressures in the wider economy could merely mark the end of the beginning.”

Nielsen’s head of retail insight Mike Watkins echoed her sentiments.

“With unpredictable weather and a change to consumer sentiment underway, we have seen retailers cut prices or increase promotional activity in the last few weeks to help top line sales growth, so it`s of no surprise that shop price deflation is lower in July than in any other month this year,” he said.

“Once again it is clear there is currently no inflationary pressure coming from retail and discounting looks set to be a catalyst to stimulate demand in the coming months.” 

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