The falling cost of crude oil and raw materials filtered through to shop prices last month, the British Retail Consortium (BRC) has said.
Overall shop price inflation slowed to 1.1% in June from 1.5% in May, its lowest level in two-and-a-half years, while food inflation fell to 3.5% from 4.3%.
The slump is caused by crude oil prices falling by a quarter on three months ago, and food commodities such as coffee and sugar also descending sharply.
In addition, weak demand and aggressive competition continues to drive retailers to put on discounts and special deals, further lowering the cost of goods.
Mike Watkins of Nielsen, a retail measurement company, said: "Prices continue to fall across retail stores which will be welcome news for the many households needing to make savings on bills and bigger-ticket items."
Food retailers have seen slow growth, but analysts expect a summer jam-packed with events should boost spending.