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Lowest shop price inflation in nearly two years

But food inflation rises to 4.2 per cent.

Overall shop price inflation declined to 1.2 per cent in February – the lowest rate in nearly two years – according to the latest shop price index from the British Retail Consortium (BRC) and Nielsen. In January, the figure stood at 1.4 per cent.

The non-food sector reported deflation of 0.7 per cent in February. Stephen Robertson, director general of BRC, said:

"While fuel and utility bills are eating up an ever-bigger proportion of household budgets, many goods sold by retailers now cost less than they did a year ago. Clothing, electricals and furniture are all cheaper than at this time in 2011 as retailers respond to the squeeze on personal finances by cutting prices, reducing their own underlying profitability."

Largely due to increased transport costs, food inflation in the UK surged to 4.2 per cent in February 2012, from 3.7 per cent in January.

“When shop prices are up by just 1.2 per cent, there's even less justification for the eye-watering 5.6 per cent business rates rise planned for April. Reducing this huge hike in trading costs should be a priority for the Budget," argued Robertson.

Mike Watkins, senior manager of retailer services at Nielsen, said:

"Promotional activity has been sustained over the last three months as consumer confidence remains fragile. Households are coping with falling disposable income as fuel and energy costs are still rising so retailers are having to work hard to encourage customers to spend.

"The recent rise in oil prices and past rises in commodity prices had an impact on food inflation but non-food shop prices are falling, which reflects consumers’ unwillingness to spend as well as the year-ago increase in VAT coming out of the comparatives."