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Record low for food inflation

FOOD PRICES are increasing at their slowest annual rate in three years thanks to the falling cost of fresh food according to the British Retail Consortium’s (BRC)-Nielsen shop price index published today.

Food prices were just 1.3 per cent higher on a year earlier in February compared to an annual increase of 2.9 per cent in January. Food inflation, largely unaffected by the VAT change, is at its lowest level since the start of the index in December 2006. In February 2009, food inflation was nine per cent.

The fresh food category reported deflation of 0.3 per cent, the first time in the history of the index that deflation has been reported within the food category.

Overall shop price inflation was 1.7 per cent last month compared to 2.3 per cent in January.

Stability in shop prices is now expected, according to the BRC. Stephen Robertson, director general of the BRC, said: “Previous falls in the value of the pound and large commodity price increases, which were pushing up food prices, have now largely worked through. Barring any lasting shocks, the price of food should continue to be relatively stable for some time.”

Non-food inflation remained the same at 1.9 per cent in February compared with the previous month. The survey said most of the adjustment in prices appeared to have been lost amongst the vast number of discounts and promotions, with retailers taking the impact on margins.

Meanwhile, data from Kantar Worldpanel showed that in the quarter to 21 February, Tesco increased its market share to 30.4 per cent from 30.1 per cent. Its nearest rival Asda saw its share drop by 0.2 per cent