Shop price inflation rose in December as festive discounting failed to keep prices down for stretched consumers.
Overall inflation rose to 0.3 per cent last month, up from 0.1 per cent in November and the highest rate of inflation since April 2013.
It is only the fourth month of inflation in the last five years, according to the latest Shop Price Index published by the British Retail Consortium (BRC) and Nielsen.
Food inflation slowed to 1.5 per cent from 1.6 per cent in November, while non-food product deflation slowed to 0.4 per cent from 0.8 per cent.
The slowdown in food inflation is likely to be a knock-on effect from lower international food prices, the report said. Global food prices have been declining since May last year.
Non-food prices stabilised over the year as a result of exchange rate adjustment after the Brexit referendum and new promotional strategies used by retailers.
BRC chief executive Helen Dickinson said: “December’s shop price figures only serve to underline how tough conditions are in the retail industry.
“Shoppers may have become accustomed to great value, but Brexit uncertainty means that a continuation of the low prices is by no means guaranteed.”
Retailers faced challenging conditions in the run-up to Christmas, with the rising popularity of Black Friday leading to a shift in discounting trends.
Next today issued the first trading update for the festive period, reducing its full-year profit expectations.
But a 1.5 per cent increase in full-price sales helped to allay fears of a disastrous Christmas for the high street.
Mike Watkins, head of retail and business insight at Nielsen, said: “With an uncertain economic outlook, retailers had to work hard to encourage customers to keep shopping, and in the run up to Christmas price discounting was deeper and began earlier across both food and non-food channels.
“Retailers know that customers are worried about their personal finances, so they will continue to do all they can to limit price rises over the next few months despite the external pressures.”