Shop prices in February deflate to deepest level for eight years

The British Retail Consortium (BRC)- Nielsen Shop Price Index data showed prices fell 1.4% last month after a 1% fall in January.

Food inflation slowed to 1.1% from 1.5% in January, the lowest ever recorded.

Non-food prices dropped 3% in February, the lowest ever recorded. This compares with a 2.7% fall in January.

BRC director general Helen Dickinson said: “It is the longest sustained period of price decreases we have witnessed, now ten months in a row.”

Food inflation is at its lowest level since the Index began as fresh food prices edged up just 1.5% in February, compared with 1.6% in January. Ambient food prices rose by just 0.4%, compared with 1.3% in January.

Inflation is likely to remain at low levels in the coming months. The Index found the global outlook for rising commodity prices remains “modest”, and this is amid a competitive grocery sector when Asda and Tesco are investing in lowering prices.

Dickinson added: “In contrast to other household bills, the price of the weekly food shop is rising at a much slower pace. Many of the larger food retailers have been looking closely at their investment in promotions and price cuts, suggesting competition could intensify further.

“This should mean consumer price inflation remains at low levels in the coming months. It is clear that retailers’ hard work to keep prices low for UK consumers is having considerable success.”

Within non-food prices clothing, footwear, furniture and flooring reported their deepest deflation ever recorded by the Index. Electricals prices fell further than any other non-food category, while the books, stationery and home entertainment category reported deflation for the third consecutive month.

Nielsen head of retail and business insight Mike Watkins said: “We have seen further falls in the Shop Price Index at the start of 2014 in particular in food. This is reflective of a challenging trading environment due to weather and weak demand, but also more favourable global supply conditions during the second part of 2013. Looking ahead, we still anticipate shop prices to remain below CPI for the immediate future.”