Shop prices hit deepest deflation rate since records began

The index, which began in December 2006, revealed food prices dropped by 0.9% in March as non-food prices plunged by 2.8%.

BRC director-general Helen Dickinson said: “Food prices saw a further drop, largely as a result of promotions for fresh food, while non-food prices fell at a faster rate than last month, hitting a 24^th consecutive month of deflation.

“Clothing and electricals continue to outshine by offering consumers eye-catching bargains. In fact, there’s evidence of plenty of promotions and price-cuts in non-food items, which should help drive up sales at a time when retailers are turning their attention to the summer ranges.”

Levels of deflation accelerated across both food and general merchandise in March.

The 0.9% rate of food price deflation compared with 0.4% in February, while general merchandise’s 2.8% decline was a sharper rate of deflation than the 2.5% recorded in February.

Nielsen head of retailer and business insights Mike Watkins said: “Deflation is likely to be with us for the near future, which means shoppers are going to be able to stretch their budgets further when shopping.

“The implication for food retailers is that this may help sustain the slowly improving sales volumes we have seen in recent weeks, and also encourage consumers to spend some of their savings on affordable indulgences.”

Alongside shop prices deflating, retailers can also expect a boost in consumer spending as a result of the consumer price index (CPI) falling to zero for the first time on record.

Meanwhile, consumer confidence has reached its highest level for 13 years, according to research firm GfK.