Supermarket prices tumble, while demand for vacuum cleaners boosts retail sales

Cheaper petrol and supermarket discount wars pushed down prices for shoppers at the fastest annual rate since the global financial crisis in August, official figures showed yesterday.

The overall price of retail goods was 1.2 per cent lower than the same month a year earlier, the biggest drop recorded since July 2009. The biggest contributor to the deflation was the cost of fuel, on the back of lower global oil prices. Petrol prices were down 5 per cent year on year.

But there was also downward pressure from food retailers, where prices fell by 0.1 per cent in the first annual decline for almost a decade as supermarkets sought to attract shoppers with discounts.

The weak inflationary pressure from the retail sector may ease the pressure on the Bank of England to put up interest rates. The consumer prices index measure of inflation rose just 1.5 per cent in July, down from 1.6 per cent in August.

The volume of retail sales grew by 0.4 per cent on July, in line with analysts’ expectations and marking a recovery from the previous month when sales were flat.

There was a boom for furniture stores, with sales up 23 per cent on last year – the biggest jump since records began in 1988.

The Office for National Statistics reported that sales were also lifted by shoppers snapping up high-powered vacuum cleaners in advance of new European energy-saving regulations imposed at the end of last month, which have banned models with motors above 1,600W.

Analysts said that these sales were probably linked to the booming housing market. “It underlines that if housing does cool off into next year then some of the buoyancy of consumer spending, and hence overall growth, will fade” said Alan Clarke of Scotiabank.

The Council of Mortgage Lenders also reported yesterday that mortgage advances grew by £18.6bn in August, up 13 per cent on the same month last year and the highest total for August since 2008. However, the CML’s chief economist, Bob Pannell, warned that there was likely to be a “gentle slowing” of activity due to the tighter lending rules imposed earlier this year by regulators and as the housing market in London softens.