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High street prices are falling at the fastest rate for a decade, according to the BRC-Nielsen Shop Price Index published this morning.

The index found that overall shop prices fell for the 23rd consecutive month, accelerating to 2.1% in March from 1.7% in February – the deepest level of deflation since the index started in December 2006.

Food reported annual deflation of 0.9% in March from a 0.4% fall in February, while non-food deflation accelerated to 2.8% in March from 2.5% in February.

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: “Prices continue to fall across the retail industry and deflation is likely to be with us for the near future, which means shoppers are going to be able to stretch their budgets further when shopping in store or online.

“The implication for food retailers is that this may help sustain the slowly improving sales volumes we have seen in recent weeks, and also encourage consumers to spend some of their savings on affordable indulgences.”

Deflation in the Fresh food category accelerated in March, reporting another new record low. Fresh food deflation now stands at 1.6% down from February’s 1.2% fall. Ambient food reported inflation of just 0.1% in March, down from 0.7% in February.

On a month-on-month basis food prices rose 0.3% after being flat in February.

Morning update

The City remains in something of a post-Easter stupor, with notable company announcements few and far between this morning in the grocery/fmcg sector.

The Grocer has the story this morning that Nottinghamshire-based food wholesaler Caterway has fallen into administration leading to the loss of 22 jobs. Administrators FRP Advisory said the firm was forced to cease trading “following a sharp deterioration in trading and once all attempts to secure new external investment failed to materialise”.

Later this morning, Kantar Worldpanel will release this month’s grocery market share figures, with all eyes on whether Tesco has been able to maintain its 2015 recovery and who is impacted most by its apparent resurgence.

The FTSE opened up this morning on the back of the Shell-BG Group merger news, edging past the 7,000pts mark in early trading.

However, most of the grocery sector’s stocks are currently down, with Associated British Foods down 1.3% in early trading after strong gains yesterday and British American tobacco 0.9% down.

Yesterday in the City

The FTSE came back from the Easter break sufficiently reinvigorated, recording its biggest daily gain since January yesterday as UK shares were boosted by rallying oil prices and expectations that the interest rates will remain low in the US.

The FTSE 100 was up 1.9% (128pts) to 6,961.7pts, with most grocery stocks joining in the positive mood.

There were big gains at Sainsbury’s (SBRY), up 3.5% to 269.4p, and Tesco (TSCO), up 2.7% to 251p, while FTSE 100 contemporaries Associated British Foods (ABF) and Coca-Cola HBC (CCH) were up 3.4% to 2,964p and 3.9% to 1,328.2p respectively.

Some of the big gainers outside the FTSE 100 included Premier Foods (PFD), rising 4.8% in one day to 43.75p, and Thorntons (THT), which was up 4.6% to 73.25p. There were also strong gains for AG Barr (BAG), up 3.9% to 640.5p, and Ocado (OCDO), up 4.2% to 352.3p.

The sector’s few fallers included Real Good Food (RGD) – which was down another 6.8% to 34p after last week’s profits warning and news it was looking for a buyer for its sugar business. The shares are down 17.6% since last week. Also Fever-Tree dipped 2.4% to 253p after strong recent gains and news that former private equity owner LDC reduced its stake by half on Friday.