Fresh food price inflation “slowed significantly” in February as overall shop prices continued to decline, according to the latest BRC-Nielsen shop price index.
The price of fresh food increased by 0.9% in February, down from a 1.7% rise in January and the lowest inflation rate since September 2017.
However, ambient food inflation continued to accelerate, with prices increasing by 2.5% in February compared to the 2.2% January increase. This was the highest inflation rate since September.
But overall shop price deflation deepened to 0.8% over the month, from 0.5% in January. Shop prices have now been deflationary for 58 months.
British Retail Consortium chief executive Helen Dickinson said: “Shop Prices dipped deeper into deflationary territory in February, with fresh food seeing the biggest reduction in the inflation rate.
“This is a further sign that we have passed the peak of the upward pressure on inflation caused by the fall in the pound in June 2016. This will ease the squeeze on consumer incomes over the coming year, but it’s likely to do little to lift the rate of growth in consumption. Earnings are still falling in real terms, despite wages increasing, and savings are unlikely to provide the same support to spending that they have over the last 18 months.
“While it’s good news that earnings and inflation are heading in the right directions for consumers, retailers can expect to see more of the same, tough trading environment over the coming months.”
She said it was “imperative” there was clarity and a definitive agreement over next month’s Brexit negotiations on transition agreements.
“Both the transition and the UK’s future relationship with the EU will determine how we maintain consumers’ current access to a diverse choice of affordable goods,” Dickinson added.