News of the biggest one-month fall in shop prices since 1997 came yesterday as the Bank of England's interest-setting committee began its monthly two-day meeting amid high confidence in the City that it will cut the Bank's official rate by a quarter point to 4.5 per cent this morning.
This confidence was dimmed, but only slightly, by a surprisingly bullish survey of service activities by the Chartered Institute of Purchasing and Supply. Unlike some others, this survey does not include retailing, where the latest report from the British Retail Consortium was uncompromisingly downbeat.
It showed that price cuts in this year's July sales were more severe and widespread than in most recent years so that those for non-food items fell by 2.78 per cent between June and July. this was the steepest monthly decline for eight years.
Food prices rose by 0.27 per cent, leaving the BRC's index for all shop prices 1.65 per cent down on June and 1.84 per cent lower than in July last year.
"Yet again, we see how the decline in consumer spending and the intense competition in the retail market is driving down prices," said Kevin Hawkins, the BRC's director general.
"This is obviously good news for the consumer, but the continuing increase in property and other costs, above the rate of inflation, will leave many retailers in a position which is not sustainable for much longer.
"We have repeatedly called for a cut in interest rates over the past few months and we hope that at last the (Bank's committee) will take action."
A separate report tracking the number of visitors to UK shopping centres - regardless of whether they spent any money - dropped last month its lowest level for for four years. Central London suffered more severely than the rest of the country after the two terrorist bomb attacks.
The retail tracking agency SPSL found that numbers across the nation were down 2.4 per cent last month compared with July last year ago - and fewer than in any July since 2001.
In central London this "footfall" declined by 12.6 per cent during the month when many retailers launched their summer sales to clear old stock and tempt shoppers back to their stores.
Tim Denison, a director at SPSL, said: "It seems terrorist activity is now considered an on-going, everyday threat which will continue to impact on the London stores and potentially further afield for some months to come." The number of shoppers in central London fell by 74.1 per cent on July 7, but bounced back quickly to stand just 10.1 per cent down on the eve of the second attack on July 21.
Footfall was down 18 per cent the following week. SPSL said: "Many day trippers and tourists have decided to delay or abort shopping trips to the capital".
But trends also indicated that July's footfall was likely to be lower than a year ago even before the first bombs went off.
On the first Saturday, when the Live 8 concert coincided with the Wimbledon tennis finals, the number of shoppers in central London was down by 22.3 per cent.
Then the Congestion Charge for motorists was raised to £8 from £5 to £8.
Dr Denison said shoppers now have less discretionary income after meeting rising monthly expenses.
They have become less inclined to spend money and more conscious than ever of levelling house prices, the cost of personal debt and the worry of future tax rises.