Overall shop prices today confirmed annual deflation in July, the third conscecutive month, has fallen 0.5% from 0.2% in June. Deflation is now the highest it has been for six-and-a-half years.

Food inflation fell to 2.2% in July, a decrease of 0.5% from 2.7% the previous month. Non-food reported annual deflation of 2.1% for July from 1.9% in June.

Food inflation was slowed by falling costs of fish, meat and vegetables, contrasting with the increased cost of breads and cereals.

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.”

She added: “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: “While 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 kickstart consumer demand as we enter the peak holiday period.”