This is the lowest level since December 2022 and it is now below the three-month average rate of 14.5%.

Food prices have soared during the cost-of-living crisis and the fall will be welcomed, however prices are still significantly higher than a year ago.

Shop price inflation, which measures the cost of a basket of 500 of the most commonly bought items, fell to 7.6% from 8.4% in June, the lowest level seen this year, according to the British Retail Consortium (BRC) and NielsenIQ.

To cope with higher prices, shoppers have changed their habits by switching to cheaper supermarkets, opting for discounts and only buying when there are offers or promotions on.

Mike Watkins, head of retailer and business insight for NielsenIQ, said: “The summer holiday period should help discretionary spend a little and whilst inflation remains high, the outlook is improving.

“Shoppers continue to change how they shop as part of their coping strategies. This includes shopping at different retailers, buying lower priced items, delaying spend or only buying when there are promotions. This behaviour looks set to continue.”

Non-food inflation also fell, to 4.74% from 5.4%, and is also now below its three-month average rate of 5.3%

Fresh food inflation dropped to 14.3% down from 15.7% the month before. This is the lowest level since November 2022. While ambient food inflation fell to 12.3%, from 13% in June, and is now at the lowest level since February 2023.

‘Shop price inflation at lowest level in 2023’

Helen Dickinson, OBE, chief executive of the British Retail Consortium, said: “Shop price inflation fell to its lowest level of 2023 and, for the first time in two years, prices fell compared to the previous month.

“Leading the cuts was clothing and footwear, where retailers mitigated wet weather with larger discounts. Food price inflation also slowed to its lowest level this year, with falling prices across key staples such as oils, fats, fish, and breakfast cereals.”

Separate data from Kantar showed that food price inflation fell by 1.6% to 14.9% in July, the steepest decline since it peaked in March this year.

‘Dark clouds on the horizon’

“These figures give cause for optimism, but further supply chain issues may add to input costs for retailers in the months ahead,” added Dickinson.

She said: “Russia’s withdrawal from the Black Sea Grain Initiative and subsequent targeting of Ukrainian grain facilities, as well as rice export restrictions from India are dark clouds on the horizon.

“We expect some global commodity prices to rise again as a result, and food prices will be slower to fall.

Retailers continue working hard to keep falling prices on track. Government must also play its part and freeze business rates from next April, or else risk adding a £400m additional pressure on prices.”