The BRC said shop prices in July were 1.4 percent lower than a year earlier, compared with a 1.3 percent decline in June.

"Clothing retailers were keen to shift their summer stock with widespread discounts clearly part of their strategy," BRC Director General Helen Dickinson said, pointing to a year-on-year fall of 4.9 percent.

Food prices rose 0.1 percent on the year -- the first increase in seven months -- after a 0.4 percent fall in June. The BRC said July's increase was a blip, driven by higher prices for bread and alcohol.

Britain's broader official measure of inflation, the consumer prices index, showed its first year-on-year fall in prices in over 50 years in April, and stood at zero in June, but few economists see a risk of entrenched deflation.

The Bank of England is due to publish new forecasts for growth and inflation on Thursday.

In the short-term at least, these are likely to point to a slower pick-up in inflation than the BoE forecast in May, reflecting greater strength in sterling and more persistent weakness in oil prices.

((Reporting by David Milliken); ((david.milliken@reuters.com; +44 20 7542 5109; Reuters Messaging: david.milliken.thomsonreuters.com@reuters.net)))