Shop prices fell at a record pace in March, with clothing and electrical prices diving, and food prices falling faster than ever before.
Overall prices fell by 2.1 per cent on the year, according to the British Retail Consortium (BRC), with food prices falling by 0.9 per cent.
Those are both the fastest declines in prices since the industry group’s records began in 2006, and comes when overall prices in the economy are teetering on the brink of outright deflation. Inflation on the official consumer price index fell to zero for the first time in February.
Falling oil prices are one major contributing factor, while a price war between supermarkets has also helped, as the stores compete for the custom of financially sensitive households.
Clothing and footwear prices led the way, falling 7.8 per cent, with electricals down 5.7 per cent and books, stationery and home entertainment prices dipping 4.6 per cent.
With prices flat or falling, economists believe the Bank of England will keep interest rates down at this week’s monetary policy committee (MPC) meeting.
“Short of a marked rise in pay growth, we think that the MPC’s doves will continue to win out over the hawks for the foreseeable future, with no hike in bank rate likely in 2015,” said economist Martin Beck from the EY Item Club, noting that economic growth is picking up and real wages are starting to rise.