Shoppers saw prices fall further in August but could see recent deflation come under pressure as Brexit looms, according to new figures.
The latest monthly BRC-Nielsen shop price index revealed that prices at retailers fell by 1.6% for the month, after a 1.3% decline in July.
It said this was particularly driven by non-food stores which continued to cut prices in order to drive people into stores amid low footfall.
Non-food prices slid by 3.4% in August, as deflation accelerated from 2.9% in July.
The index also revealed that fresh food inflation slowed down significantly in August, dropping to 0.2% growth from 0.9% in July.
This inflation eased as the availability of fresh, seasonable produce improved throughout the month, it said.
Meanwhile, the price of ambient food, such as store-cupboard items, increased by 2.8% in August, accelerating from 2.3% growth in July.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: “Consumers will welcome another month of falling prices in shops.
“However, these lower prices are already under threat from increased costs associated with implementing coronavirus safety measures and are certain to rise if the UK ends the transition period without a trade deal with the EU.
“The absence of a tariff-free deal will lead to higher prices for consumers as thin retail margins force retailers to raise prices in response to higher import costs.”
Mike Watkins, head of retailer and business insight at Nielsen, said: “With millions of families choosing to holiday in the UK this summer, supermarket sales remain buoyant with sales of fresh foods showing an uptick, helped by hot weather earlier in the month and slowing inflation as seasonal produce becomes available.
“This has offset some of the increases in ambient food and drink. However, deflation continues in much of non-food with retailers still unsure about the levels of demand for next seasons’ ranges.”