Shop prices have fallen for the first time in nearly three years as the inflation crisis fades.

Prices were 0.3pc lower in August than a year earlier, according to research by the British Retail Consortium (BRC) and Nielsen IQ.

This is down from a rise of 0.2pc in the year to July and comes as families’ spending power finally starts to recover after the cost of living crisis. 

The fall was triggered by retailers offering big discounts on goods. Food prices kept rising. albeit more slowly than previously. 

It is likely to raise hopes that overall inflation will remain close to the Bank of England’s 2pc target, paving the way for further interest rate cuts in a boost for millions of mortgage borrowers.

 Helen Dickinson, chief executive of the BRC, said that overall price falls were “driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods”.

She added: “This discounting followed a difficult summer of trading caused by poor weather and the continued cost of living crunch impacting many families.”

Food prices were 2pc higher than a year ago, the lowest rate of increase since November 2021. 

Ms Dickinson said this reflected fresh food prices “especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened”.