The UK’s supermarkets are heading into the vital Christmas period with food price inflation remaining at historic lows.

The big four all saw prices fall in November, with the rate of annual inflation for the month to 1 December remaining at -1.2%, according to The Grocer Price Index, which analyses 70,000 grocery products.

The continued deflation marks the seventh consecutive month of year-on-year price falls, though the 1.17% deflation recorded last month was a fraction less than the 1.24% high in the month to 1 November.

big four inflation

Big four inflation: click to enlarge

After its much-publicised investment in price and its loyalty card scheme, Morrisons recorded the highest level of annual deflation for the second consecutive month. Overall average prices fell by 1.74% last month, closely followed by a 1.48% year-on-year price fall at Tesco. Asda’s average prices fell by 1%, while Sainsbury’s saw annual deflation of 0.69%. Waitrose, which is not included in the overall GPI, saw price deflation of 1.06%.

Once again, deflation was heavily driven by falling fruit & veg prices - down 2.93%. The soft drinks category has also become a significant driver of deflation, with prices falling by 2.87% in the month to 1 December, up from the 1.79% deflation of the previous month. These trends were seen most clearly at Morrisons, which was selling fruit and veg 8.39% cheaper than during the corresponding month last year.

Prices across all but two categories fell during the month. Baby goods, which have consistently seen price rises in 2014, rose by 2.05% across the big four, and the price of health and beauty products crept up by 2.62% having been largely flat during the second half.

There was a notable difference in dairy prices - Asda saw significant year-on-year deflation of 7.13% in the category, while Morrisons and Sainsbury’s saw prices rise by 2.23% and 0.68% respectively.

In month-on-month terms, average prices across the top four fell by 0.52%, though Morrisons and Asda saw prices edge up (1.28% and 0.12% respectively) in the month to 1 December. The biggest month-on-month category falls were seen in frozen goods (-2.1%) and alcoholic drinks (-1.49%).

While supermarket action on price in the second half of the year accounts for a measure of the continued deflation, the downwards price pressure of commodities - notably wheat, maize and pork - is continuing to have a significant effect.

The impact of lower commodity prices is likely to be accelerated in the short-term by the recent falls in crude oil. However, the level of deflation is unlikely to rise significantly higher year on year as inflation had already collapsed by the end of the first quarter of 2014.