By Daniel Hunter

Overall shop prices reported annual deflation for the third consecutive month in July, falling 0.5% from 0.2% in June, according to the British Retail Consortium (BRC).

Food inflation fell to 2.2% in July from 2.7% in June. Non-food reported annual deflation of 2.1% in July from 1.9% in June.

Helen Dickinson, British Retail Consortium Director General, said: "Shop prices have now fallen for three consecutive months compared with last year and July's rate showed the biggest drop for six and a half years.

"This is great news for hard pressed families whose budgets have been squeezed by rising utility bills, transport and other costs. It shows just how hard retailers are working to serve their customers and underlines how deep the promotions and discounts from retailers are at the moment.

"In particular, there has been significant discounting of clothing and footwear across women's, men's and children's categories. Anyone who's been waiting to update their wardrobe would be well advised to look at some of the deep discounts that are currently available.

"Food inflation has also dropped from last month and is now at its lowest rate since summer 2010."

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: "Whilst the 2013 heatwave is bringing strong sales uplifts for food retailers it`s holding back some non-food sales growth, so the welcome slowdown in shop price inflation in July should benefit most retailers and help to kick start consumer demand as we enter the peak holiday period."

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