UK shop price deflation deepens as food costs fall

British Retail Consortium said overall prices in February were down 1.7% on last year amid supermarket wars and drop in commodity costs

High street price cuts deepened last month as fresh food costs dropped at the fastest pace for at least eight years, according to industry figures that will reinforce expectations the UK is headed for a brief period of deflation.

The British Retail Consortium reported deflation in overall shop prices for the 22nd consecutive month, as prices in February fell 1.7% on a year ago. That followed deflation of 1.3% in January.

The fiercely competitive market will see retailers continuingly responding to their customers with keen prices and promotions to maintain market share.

The challenge for food retailers is that in store promotions also remain close to an all-time high at 33% of sales and the use of vouchers or coupons continues, making consumer demand rather unpredictable. Even so, shoppers are seeing a double benefit of price cuts and promotional offers," said Mike Watkins, Nielsen's head of retailer and business insight.

Related: Incomes rise but working-age households remain worse off

Coffee prices have fallen quite dramatically in February, as continuing rains in Brazil dampened worries of a large shortfall in Arabica beans. Prices have fallen 38% since their recent peak in October 2014 when drought conditions in Brazil caused prices to soar.

Just when drivers and businesses hoped that there might be some stability in petrol and diesel prices, commodity market greed has pushed up costs again and many petrol stations have wasted little time in passing them on."