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UK retail inflation declined to the lowest level in a year in September as food price growth eased sharply to a single-digit rate, industry data showed on Tuesday.

Shop prices rose at an annual rate of 6.2 per cent last month, down from 6.9 per cent in August — the lowest level since September 2022, according to figures published by trade body the British Retail Consortium.

The drop in retail inflation is good news for the economy. With household incomes boosted by record wage growth, lower price rises could help increase consumer spending and business activity.

Households benefited from price cuts for school uniforms and other back-to-school essentials, with non-food inflation falling to 4.4 per cent in September, its lowest since December 2022, and down from 4.7 per cent in August.

The data showed that annual food inflation dropped to 9.9 per cent in September, hitting single digits for the first time since August last year after falling for five consecutive months, and down from an all-time peak of 15.7 per cent in April.  

The BRC also reported that food prices fell by 0.1 per cent between August and September in the first month-on-month drop for more than two years, which the trade body attributed to “fierce competition between retailers”.

“Customers who bought dairy, margarine, fish and vegetables — all typically own-brand lines — will have found lower prices compared to last month,” said Helen Dickinson, chief executive of the British Retail Consortium.

Line chart of Annual % change  showing UK shop price inflation declined in September

The drop in food price inflation will be a big relief for the UK’s poorest households, which devote a large share of their income to necessities and have been hit hard by soaring food and energy costs following Russia’s invasion of Ukraine in February 2022.

“With further price cuts by supermarkets in recent weeks, food inflation continues to slow, which is good news,” said Mike Watkins, head of retailer and business insight, at NielsenIQ, which helped compile the data.

Fresh food inflation, which has been the main driver of retail price growth over the past year, also slowed in September down to 9.6 per cent — the lowest since July 2022 — from 11.6 per cent in the previous month, according to the BRC data. It reached a peak of 17.8 per cent in April.

The level of inflation for so-called ambient food — items that can be stored at room temperature — remained in double digits last month at 10.4 per cent, but was down from its peak of 13.1 per cent in May.

According to official figures, food and non-alcoholic beverage inflation fell to 13.6 per cent in August from 14.8 per cent in July, after hitting a 45-year high of 19.2 per cent in March. The BRC figures, which precede the government’s statistics, suggest that the slowdown in inflation will continue this month.

However, despite the drop, food inflation in the UK was still much higher than in the US, where it stands at 4.3 per cent, and in the eurozone, where it is 8.8 per cent.

Dickinson said she expected shop price growth to continue to ease over the rest of the year but warned that this was subject to “many risks”, including “high interest rates, climbing oil prices, global shortages of sugar, as well as the supply chain disruption from the war in Ukraine”.

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