Shop prices were in deflation in August for the first time in nearly three years, according to new data, driven down by retailers slashing the prices of summer stock to shift inventory.

The British Retail Consortium-NIELSENIQ shop price index showed prices fell 0.3% in August, down from inflation of 0.2% in the previous month. This is below the three-month average rate of 0.0%. Shop price annual growth remained at its lowest rate since October 2021.

Non-food items led the deflationary charge, falling 1.5% in August, further down from -0.9% in the preceding month. This is below the three-month average rate of -1.1%. Inflation is at its lowest rate since July 2021.

“This discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch impacting many families,” said BBRC CEO Helen Dickinson.

“Food inflation eased with fresh food prices, especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened.”

Read more: Best UK savings accounts offering above inflation rates

Food inflation slowed to 2% in August, down from 2.3% in July. This is below the three-month average rate of 2.%. The annual rate continues to ease for food items, and inflation is at its lowest rate since November 2021.

Fresh food inflation slowed further in August, to 1%, down from 1.4% in July. This is below the three-month average rate of 1.3%. Inflation is its lowest rate since October 2021.

Retail prices are a hot topic right now following concern that inflation would remain sticky, exacerbating cost of living pressures. Earlier in August, the Bank of England cut its interest rate for the first time in four years, reducing the base rate by a quarter point to 5%.

There have already been concerns about the costs of energy, with a 10% hike in Ofgem’s energy price cap due to kick in in August.

Bank of England governor Andrew Bailey said on Friday at the annual Jackson Hole symposium of central bankers that it is “too early to declare victory against inflation”.

Read more: What is the 50/30/20 budgeting rule and does it work?

“Recent experience leads me to be cautiously optimistic that inflation expectations are better anchored as a result of the regimes we have in place,” he said.

“The second round inflation effects appear to be smaller than we expected. But it is too early to declare victory.”

The outlook on food prices is uncertain going into winter due to the impact of climate change on crops both domestically and globally, alongside geopolitical tensions, Dickinson said.

Story continues

“As a result, we could see renewed inflationary pressures over the next year,” she added.

Download the Yahoo Finance app, available for Apple and Android.