Food price inflation dropped to 2.3% in August compared with 3.8% in July, according to figures from the British Retail Consortium (BRC) out today.
But non-food prices fell by 1.4% during the month, up from a 1.3% drop in July, taking overall retail price inflation into negative territory for the first time in two-and-a-half years.
Overall annual shop price deflation was 0.1% in August, compared with inflation of 0.5% in July.
Stephen Robertson, BRC director general, said: “Deflation has arrived. Overall shop prices are cheaper than a year ago for the first time since February 2007.
“The fall has been driven by a huge drop in food inflation – which is now less than a quarter of what it was last August. This reduction is largely due to commodity prices, such as oil and wheat, falling since last summer’s peak to much lower levels.”
Mike Watkins, senior manager, retailer services at analyst Nielsen commented: “Food inflation has slowed dramatically over the last six months and at 2.3% is at the same level as it was two years ago.
“Most of the global commodity price increases of last summer have now fed-through to shelf prices, but there is still some cost price inflation in ambient food as a result of past falls in sterling.
“With retailers increasingly using price cuts as the prime promotion mechanic, we can expect further downward pressure on shop prices especially in food, over the next few weeks.”
Fresh food inflation has been a significant downward force on overall food inflation, falling to 1.4% in August, its lowest level since the series began in December 2006.
