UK shop prices have plummeted to their lowest level in three years, offering a lifeline to cash-strapped consumers amid the cost of living crisis. This latest data reveals a sustained downward price trend, with a significant month-on-month decrease exceeding the three-month average. As we move into the crucial fourth quarter, traditionally a peak shopping period, the sustainability of these price cuts will be a key factor to watch. The ongoing economic uncertainty continues to shape consumer behaviour, with most reporting changes in their spending habits due to budget pressures.

This deflationary trend in prices presents an intriguing challenge for the BoE due to the divergence between food and non-food inflation rates. The downward trend in non-food items suggests that consumer demand may be softening, which could support arguments for reducing rates. However, the uptick in food inflation complicates this picture, with the MPC hyper-vigilant for any signs of inflationary pressure.