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Shop prices fell 0.1% year on year as headline figures were dragged by a “sharp” 1.2% decline in non-food prices

UK shop prices remained steady in July, which marked a second consecutive month of deflation, following an inflationary period since October 2018.

Shop prices fell 0.1% year on year as headline figures were dragged by a “sharp” 1.2% decline in non-food prices, data from the BRC-Nielsen shop price index covering the period from 1 to 5 July showed.

This was below both the 12 and six-month average price increases of 0.3% and 0.4%.

“Shop prices fell by 0.1% for the second month in a row. Many consumers will be pleased to see the price of non-food products continuing to fall at a steady rate, underlining the stiff competition between retailers that is driving down prices,” said BRC CEO Helen Dickinson.

Meanwhile, food inflation eased slightly, with prices up 1.7% compared to 1.8% in June, due in part “to the fall in global food prices” Dickinson added.

Fresh food inflation slowed to 1.2% in July from 1.4% the prior month, with meat marking the only element in the category experiencing price reductions. Ambient food inflation accelerated to 2.4% from 2.3% in June.

“With so much economic uncertainty, it’s good news for shoppers that there was no pressure coming from shop price inflation during July,” said Mike Watkins, head of retailer and business insight at Nielsen.

“Looking ahead for the next few months, we anticipate broadly stable food inflation and non-food retailers looking to keep any price increase to a minimum, as shoppers continue to be cautious around their retail spend.”

However, Dickinson warned food prices could start rising again if the UK leaves the EU without a deal.

“While we expect food inflation to remain steady over the next few months as retailers work hard to keep prices low, this will depend on whether the UK can navigate an agreement with the EU to ensure frictionless tariff-free trade continues after 31 October,” she added.

It comes as prices at the pumps are rising again, with unleaded petrol hitting 128.0p per litre on average in the UK this week, and diesel reaching 132.6p per litre, according to latest figures from the Department for Business, Energy and Industrial Strategy.

After rising steadily through the first five months of the year, fuel prices dropped sharply in June 2019 amid fears of a trade war between the US and China, which caused a 20% slump in Brent crude oil futures.

However, the OPEC and its partners have since agreed to extend production cuts until March 2020, prompting a fresh surge in crude oil prices in recent weeks. As a result, prices at the pump have been creeping up again since the beginning of July, and petrol is now at a six-week high.

On average, petrol prices are now 6.4% higher than they were at the beginning of January 2019, the data shows, while diesel prices are up 1.7%.