UK shop prices dip for first time in nearly 3 years, survey shows

(Reuters) - British shop prices fell in annual terms this month for the first time since October 2021, pushed down by summer sales of clothes and household goods, a survey showed on Tuesday.

The British Retail Consortium said shop prices fell by 0.3% in August compared with the same month in 2023, after a 0.2% increase in July.

Prices of non-food goods dropped by 1.5%, the biggest fall in just over three years, while food prices increased by 2.0%, slowing from 2.3% in July and marking the smallest rise since November 2021.

"Shop price inflation has fallen again in August as many non-food retailers have kept promotional support due to the unpredictable weather," said Mike Watkins, head of retailer and business insight at market research firm NielsenIQ, which compiles the data.

"Food retailers have introduced more price cuts to help drive incremental sales during the 'summer of sport'," Watkins added, referring to the Paris Olympics and the men's Euro 2024 soccer tournament.

The BRC survey covered prices in major store chains between Aug. 1 and Aug. 7.

The latest official measure of annual consumer price inflation - which includes services as well as shop goods - rose for the first time this year during July to 2.2%, from 2.0% previously.

The Bank of England expects CPI inflation to reach around 2.75% by the end of the year as the effect of sharp falls in energy prices in 2023 fades, before returning to the BoE's target of 2% in the first half of 2026.

The BoE cut interest rates from their 16-year high earlier this month and investors expect at least one more quarter-point reduction before the end of the year.

(Reporting by Andy Bruce; Editing by William Schomberg)