Data from the latest BRC-Nielsen Shop Price Index shows that food prices saw their biggest fall for over a year last month.
Overall shop prices saw deflation of 2.0% in June, deepening from the 1.8% decline in May. Non-food deflation fell to 2.8% in June from 2.7% in May.
However, food deflation deepened further, falling to 0.8% from 0.3% the previous month. This was driven by an acceleration of fresh food deflation, falling to 1.5% from 0.8% in May. Meanwhile, ambient food inflation decelerated to 0.1% in June from 0.4% in May.
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), commented: “This extraordinary 38 month run of deflation has undoubtedly been good for consumers. While it has been driven largely by falling prices for non-food items we have, from time-to-time, seen food in deflationary territory as well – which provides the real boon for household budgets. June was one of those months with food prices falling by 0.8%, the deepest deflation in food for over a year.”
She added: “While the good news for household budgets continues, prices in store will eventually rise again. However, the time it takes for any price increases to make a re-appearance will depend on a combination of factors including the future value of the pound, commodity prices and any eventual impact of last week’s Brexit vote on input costs. That said, there won’t be any instant shocks as any changes will take time to feed through. Continuing fierce competition also means that putting up prices may not be viable for some retailers.”
Mike Watkins, head of retailer and business Insight, Nielsen, said: “Whilst changes in the economic landscape are anticipated next year, the current focus for the industry is the continued deflationary environment. This is good news for shoppers who benefit from falling prices but is added pressure for retailers as they balance increased costs from the national living wage and investment in multi-channel, with volatile consumer demand. A return to inflation is not expected just yet so it`s business as usual over the summer months and encouraging shoppers to keep spending is the priority.”