Shop prices fell this month as retailers attempted to attract reluctant customers with heavy discounting.
Prices deflated by 0.1 per cent in July, driven by a 1.2 per cent drop in the price of non-food items such as electricals and clothing and footwear.
Read more: Shop price inflation gathers pace in May
The fall in prices marks the second consecutive month of deflation, according to the latest data from the British Retail Consortium (BRC) and Nielsen.
The BRC said in the “competitive environment” retailers were using price discounts to attract customers.
BRC chief executive Helen Dickinson said the drop in non-food product prices underlines “the stiff competition between retailers that is driving down prices”.
Meanwhile, food inflation eased slightly to 1.7 per cent from 1.8 per cent in June. Fresh food inflation slowed from 1.4 per cent to 1.2 per cent. Shelf-stable food inflation accelerated to 2.4 per cent from 2.3 per cent in June.
Nielsen head of retailer and business insight Mike Watkins said: “With so much economic uncertainty, it’s good news for shoppers that there was no pressure coming from shop price inflation in July.
“Looking ahead for the next few months, we anticipate broadly stable food inflation and non food retailers looking to keep any price increase to a minimum, as shoppers continue to be cautious around their retail spend.”