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Shop prices fall again in August as food deflation hits record low

UK shop prices fell by 2% in August, following a 1.6% decline in July, as they continued their record run in deflationary territory.

GENERAL MERCHANDISE

Shop prices fall again in August as food deflation hits record low

The figures from the British Retail Consortium and Nielsen in their monthly shop price index show that non-food deflation accelerated to 2.5% in August from 2.2% in July while food deflation accelerated to a record low, falling 1.1% in August from 0.8% in the previous two months.

The BRC said lower prices this August compared to last were driven by a combination of continuing promotional activity, softening oil prices and a global supply glut of wheat weighing on food prices.

Helen Dickinson, BRC chief executive, said: “The devaluation of sterling in wake of the referendum will put upward pressure on shop prices. But that’s likely to take several months to properly feed through, given that retailers won’t feel the brunt of the cost increases until existing contracts with foreign suppliers come to an end. Even then, retailers will have to make a decision about when and how much to pass onto consumers."

Mike Watkins, head of retailer and business insight at Nielsen, added: “Competition for discretionary spend is likely to intensify as we head towards the end of the year, so retailers will be keen to keep prices low and promotions sharp."

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