Food prices fall – but effect of Brexit vote threatens to bite

The price of food plunged by a record amount in August but experts warn that the effect of the Brexit vote may soon be felt by consumers.

The price of food fell by 1.1 per cent in August, compared to a 0.8 per cent fall between June and July, according to the latest monthly index compiled by Nielsen and the British Retail Consortium (BRC).

August's figures show that this is the first time food deflation has been higher than one per cent, year on year, since the index was started in December 2006.

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The index shows that prices in all types of shop fell by 2.0 per cent last month, compared to a 1.6 per cent fall between June and July, says Reuters.

According to the Daily Telegraph, food is dramatically cheaper because of a combination of soft oil prices, an oversupply of wheat and the continuing price war among British supermarkets.

Morrisons, the UK's fourth-biggest supermarket, reported a fresh round of price cuts today. It is reducing the price of its 'essential' range meat and poultry products by 12 per cent as it tries to fight the discounters, reports the Financial Times.

The supermarket is also reducing the price of 30 fruit and vegetable products. The chain says it has slashed prices on more than 4,435 products in the year to date, as part of its "price crunch" strategy.

But the BRC warns that the weakened pound, in the wake of the Brexit vote, is "likely to push up grocery prices in the coming months".

The BRC's Helen Dickinson says: "The devaluation of sterling will put upward pressure on shop prices. But that's likely to take several months to properly feed through [when] existing contracts with foreign suppliers come to an end.

"Lower prices than a year ago across most channels with further price-cuts by supermarkets has been good news for shoppers and helped to keep consumer spend buoyant over the summer.

"Competition for discretionary spend is likely to intensify as we head towards the end of the year, so retailers will be keen to keep prices low and promotions sharp."