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Slowdown in food price inflation

Food price inflation has slowed to its lowest level in almost three years as retailers lure in cash-strapped shoppers with promotions and vouchers.

Food prices rose by 2.4% in May on a year earlier, down from 2.9% inflation in April and the lowest rate since June 2010, according to the latest British Retail Consortium (BRC)-Nielsen survey.

Prices of non-food goods remained in negative territory, falling by an accelerated 1.5% year-on-year as retailers discounted heavily across clothing, footwear, electricals, furniture and carpets. As a result, the wider measure of shop price inflation fell by 0.1% in May, the first overall deflation since September 2009.

Falling prices of commodities such as wheat and corn fed through to meat prices and helped hold back rises in grocery costs, the BRC said.

Heavy discounting drove non-food deflation to its lowest rate since June 2009 and compared with a 1% price fall in April. Retailers relied on promotions to shift stock and capitalise on improving consumer confidence and warmer weather.

BRC director general Helen Dickinson said: "Times remain tough but it seems that retailers are reading the market well and doing what they can to offer customers the best possible value on their shopping."

Slowing price rises at the tills follow reports of rising sales in May. The BRC this week said offers and discounts helped like-for-like retail sales rise 1.8% in May year-on-year.

Weaker inflation also reflects official figures from the Office for National Statistics, which showed consumer prices index (CPI) inflation fell to 2.4% in April. That was down from 2.8% in March and a sharper fall than economists had expected.

Mike Watkins, head of retailer and business insight at Nielsen, said: "With levels of recent consumer spend also being impacted by the weather, there continues to be a dependency by many retailers to use vouchers or coupons to drive footfall.

"Nevertheless, with food inflation slowing as we finally start summer, the outlook for the next three months is looking much brighter."

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