Food prices fell for the second month running, with 0.4% annual deflation hitting the grocery industry in February, the BRC-Nielsen shop price index has reported.
The fresh food category exerted particular pressure, as it reached a record new low of -1.2%, outweighing the rise in ambient food. Though deflation slowed marginally since January’s -0.5%, it is the first time that the index has ever reported annual food price deflation for two months running. The food inflation average for the last twelve months now stands at 0.2%.
With milk, cheese, eggs, vegetables and convenience food all cheaper than they were a year ago, BRC director general Helen Dickinson said: “The fiercely competitive market will see retailers continuingly responding to their customers with keen prices and promotions to maintain market share.”
Overall, shop prices deflated for the 22nd consecutive month according to the index, accelerating from January’s 1.3% deflation to 1.7% in February. Non-food deflation increased to 2.5% in February from 1.8% in January.
Mike Watkins, head of retail and business insight at Nielsen, said: “Since the start of the year, we have seen some very competitive pricing across both the food and non-food channels and this is helping to keep prices low for shoppers. With many commodity prices still falling, if shoppers can be encouraged to spend more, then retailers will be looking for volume sales increases over the next few months.
”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.”