Grocery prices see largest drop in over a year

Food prices saw their biggest fall for over a year last month as prices continued to drop, according to market analyst British Retail Consortium-Nielsen (BRC).

Grocery prices fell 0.8% in June, in an extension to the 0.3% fall seen in May. This marked the deepest deflation in food for over a year.

Shop prices overall, including non-food items, fell 2% year-on-year, marking the 38th consecutive month of decline.

BRC said it was an “extraordinary run of deflation”, but added that it eventually expected prices to rise again.

Helen Dickinson, BRC chief executive, said: “The time it takes for any price increases to make a reappearance will depend on a combination of factors, including the future value of the pound, commodity prices and any eventual impact of the Brexit vote on input costs.”

The sharp fall in the pound, which has plunged about 11% against the US dollar since the outcome of the EU referendum vote, has led several analysts to warn that the price of groceries could rise longer-term.

Some 40% of food consumed in the UK is imported, meaning any long-term shift in exchange rates could lead to higher food costs. But Dickinson said the continuing fierce competition between retailers meant raising prices “may not be viable for some retailers”.

This comes a week after research firm Kantar Worldpanel reported like-for-like (LFL) grocery prices fell 1.4% in the 12 weeks to 19 June compared with a year earlier, marking the 23rd consecutive period in which prices have fallen.

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