Overall shop price inflation in the UK slowed to 1.1 per cent in June 2012 from 1.5 per cent previous month marking the lowest since 2009, according to the British Retail Consortium (BRC)-Nielsen Shop Price Index released today.

Food inflation declined to 3.5 per cent from 4.3 per cent in May, while deflation in non-food increased by 0.3 per cent from 0.1 per cent in May.

The shop price index measures changes in the price of 500 of the most commonly bought items. It demonstrates the extent to which retailers contribute to inflation through the pricing of commonly bought goods.

Stephen Robertson, director general of BRC, said: “Overall shop price inflation is at its lowest for two and a half years. This is good news all round for hard-pressed customers and shows retailers holding back prices as commodity cost pressures ease.

“Crude oil prices are down a quarter on three months ago with food commodities, such as coffee and sugar, falling sharply over the same period. In a highly competitive market, retailers are rushing to reflect those drops in good deals for customers. At the same time, weak consumer demand continues to drive deep and heavily targeted discounting, particularly among non-food goods.

“Food inflation is at its lowest for nearly two years and the price of non-food goods is down on a year ago for the fifth consecutive month. With real disposable incomes still dropping, let's hope there's more downward pressure to come from past falls in commodity prices working through to inflation.”

Mike Watkins, senior manager for retailer services at Nielsen, said: “Prices continue to fall across retail stores which will be welcome news for the many households needing to make savings on household bills and bigger ticket items in particular. However, it's double-edged for food retailers where demand remains weak. The unpredictable summer weather has dampened recent growth but, with the summer of events underway, the fall in inflation should give a boost to shopper spend.”