By Daniel Hunter

According to data from the British Retail Consortium (BRC), overall shop price inflation slowed to 1.0% in July from 1.1% in June. Food inflation fell to 3.1% in July from 3.5% in June. Deflation in non-food was unchanged at 0.3% in July.

Stephen Robertson, British Retail Consortium Director General, said: "A two-year low for food inflation is good news for hard-pressed households still suffering falls in disposable incomes. Lower shop price inflation is helping to narrow the gap between living costs and wage increases.

"Extra promotions, particularly linked to party food and this summer's big events, are combining with past falls in commodity prices which are working their way through to shop prices.

"But the relief may not last. Poor harvests, especially of corn and wheat in the USA, are creating a build-up of inflationary pressure. Animal feed has risen sharply in recent months and is likely to affect prices for things like meat, poultry and eggs.

"Overall, non—food goods were cheaper than a year ago for a sixth month as retailers discounted to generate sales. Great news for customers who have spare money to spend on clothing, electricals and furniture. But many don't have money available or the confidence to spend even with prices down."

Mike Watkins, Senior Manager, Retailer Services, Nielsen said: "Over the last few months we have seen difficult trading conditions due to the unseasonable weather. In food, promotions remain close to an all-time high and the focus on price cuts and the use of vouchers or coupons continues as consumer demand is unpredictable. So, shoppers are seeing a double benefit as external cost price pressures have also eased a little which contributed to a further slowing in shop price inflation in July. Once back from their summer holidays, we expect consumers to still be cautious about big ticket or discretionary spend, which is why there is no upward pressure on non-food prices at the moment."

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