UK shop price annual inflation appears to have stabilised, staying at 0.2% in July, which is below the three-month average rate of 0.3% and is at its lowest rate since October 2021.

In fact, non-food categories remained in deflation with a July dip of 0.9%, the latest BRC-NielsenIQ Shop Price Index showed on Tuesday.

Yet there were warnings that inflation may not be fully beaten and that retailers need to continue working hard to keep inflation under control, especially in the fashion sector

So what’s the situation today? Food inflation continues to be higher than non-food and is likely to still be suppressing consumers’ interest in discretionary spending.

But food inflation is slowing (it was 2.3% in July, down from 2.5% in June and below the three-month average rate of 2.7%). That perhaps bodes well for consumers to feel better about discretionary spending in the months ahead.

It’s all a far cry from period of rampant inflation last year when high-single-digits or low-double-digits were the norm and meant consumers were prioritising paying their heating bills and feeding their families over anything else.

Helen Dickinson, chief executive of the British Retail Consortium, said of the latest figures: “In July… non-food price deflation continued, albeit at a slower rate than June. Holiday-makers could pick up bargain summer wear and summer reads as clothing and footwear prices fell for the seventh consecutive month amidst persistent weak demand, and the prices of books fell.

“The 2023 declines in global food commodity prices continued to feed through, helping bring down food inflation rates over the first seven months of 2024. However this shows signs of reversing, suggesting renewed pressure on food prices in the future.”

And Mike Watkins, head of retailer and business insight at NielsenIQ, added: “As we cycle through high inflation comparatives from a year ago we can expect a lower level of inflation for a number of months to come. But with the squeeze on household finances continuing, consumer confidence only slowly improving, and poor summer weather so far, retailers will still need to keep any price increases to a minimum to encourage shoppers to spend.”