Britain’s supermarket price war has triggered the first annual drop on record in the amount people are spending in food shops, according to official data.

Shoppers spent 1.3 per cent less in food shops in July than in the same month a year ago, the first decline in that measure since the UK Office for National Statistics started releasing retail sales data in 1989.

“While the July 2013 figure was high at 5.9 per cent, the fall in the amount spent in July 2014 suggests that prolonged discounting and price wars were having an effect on overall sales,” the office said.

Retail sales volumes rose overall for the 17th consecutive month as the economy continued to recover.

Sales were 0.5 per cent higher than last month after stripping out volatile fuel sales and 3.4 per cent higher than a year ago, broadly in line with economists’ expectations.

“July’s UK retail sales figures provide reassurance that consumers are still willing to spend more even though an interest rate hike is looming,” said Capital Economics economist Samuel Tombs.

Rate hike debate

The data comes a day after Bank of England minutes showed two of the nine monetary policy committee members voted to raise rates this month, the first breakdown in unanimity since 2011. The stronger pound, which makes imports cheaper, has also helped to push down retail prices and depress the overall inflation rate to 1.6 per cent.

Prices in food shops were 0.2 per cent higher than a year ago, the lowest inflation in that sector since 2004.

The average prices of goods sold in the shops in July 2014 were 0.9 per cent lower than a year ago. – (Copyright The Financial Times Limited 2014)