The pace of food price rises has eased back, thanks to lower pressure from the Brexit-hit pound.
According to retail industry data, food inflation slowed in July to an annual rate of 1.2% after reaching levels not seen for three-and-a-half years in the previous month.
The BRC-Nielsen Shop Price Index showed the slowdown helped overall shop prices fall by 0.4% following the 0.3% reduction in June.
The figures were released as UK shoppers continue to face a squeeze from higher prices – a result of import costs going up in the wake of the collapse in the value of the pound after the EU referendum.
Store cost increases began to feed through at the start of the year at a time when average wage increases also came under pressure.
While the latest official inflation figures have also shown an easing, economists believe it will hit 3% by the end of the year.
Video: Shock inflation fall as oil costs sink
In the retail sector, strong competition has helped check price growth, especially in the grocery market.
Helen Dickinson, chief executive of the British Retail Consortium (BRC) which helped compile the figures, said: “July saw lower food price inflation than in June, bringing the march of overall shop prices towards inflationary territory to a halt, for now at least.
“Lower food price inflation in July was, in part, the result of the easing of upward pressure from the currency depreciation on fresh food.
“Shorter stock cycles in fresh food mean that more of the impact of the currency depreciation fed through into inflation earlier in the year and hence it is now subsiding.
“However, the upward pressure on food inflation has not entirely disappeared: ambient food prices are still affected and as seasonal pricing dynamics play out, we could see fresh food inflation pick up again.”
Nielsen’s head of retailer and business Insight, Mike Watkins, believed the pressure on family budgets would help force the retail industry to remain cautious in its pricing.
He said: “The amount of inflationary pressure coming from retail remains less than from other elements of the economy and in the last few weeks, whilst we have seen a return to more normal weather, the level of consumer demand remains unpredictable.”
Source: Sky