Shop price inflation falls as grocers vie for share

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Consumers received one bit of good news yesterday – a fall in food prices led to lower inflation in shops last month. The overall rate of shop-price inflation fell by 0.3 per cent between February and March, but it remained stubbornly high at 2.4 per cent last month, according to the British Retail Consortium-Nielsen Shop Price Index.

The overall figure was driven downwards by a reduction in food inflation, which fell to 4 per cent in March, down from 4.5 per cent the previous month. While commodity pressures continue to mount up, grocers further ratcheted up their promotional discounting in stores last month, as they sought to compete with each other for market share.

The level of promotions in thesupermarket sector has reached an all-time high of 40 per cent. The Co-operative Group said about half of its products were on promotion – a more-than-40-year high – last week.

Stephen Robertson, the director-general of the BRC, said: "Global commodities are still exerting considerable upward pressure on retailers' costs, but a greater intensity of promotions has led to a fall in year-on-year food inflation, which will come as a great relief to hard-pressed families.

"Over the shorter term, food was actually cheaper in March than February. It's a clear demonstration of competition in the retail sector keeping costs down for shoppers."

Non-food inflation also slowed more marginally to 1.5 per cent in March, compared to 1.6 per cent in February.

Among general-merchandise retailers, DIY, gardening and hardware shops raised prices by 0.5 per cent in March, which represents a 4.5 per cent leap on the same month the previous year. But clothing and footwear prices dropped by 0.1 per cent in March, a 1.4 per cent fall on 2010.