Subdued food prices for consumers
Consumers are enjoying the longest period of subdued food prices in 14 years as the supermarket price war intensifies, official figures showed today.
It came as separate industry data showed that total sales in the sector were declining for the first time in at least 20 years.
Figures from the Office for National Statistics (ONS) showed food and alcoholic beverage prices were 1.4% lower in October compared to the same month last year.
It matched a decline in September, which was the steepest since 2002, and meant that food prices have been flat or falling for six months in a row - the longest such stretch since 2000.
The overall rate of Consumer Price Index (CPI) inflation edged up to 1.3% for October from a five-month low of 1.2% in September, against expectations that it would be unchanged.
But the pound saw only a muted rise against the dollar as economists expect CPI to fall in coming months - with the Bank of England saying it will probably dip below 1% - and that interest rates will not be raised until well into 2015.
The inflation increase - spurred by petrol price cuts being smaller than last year, and new computer games released for Christmas - also blunted hopes that wage rises were about to catch up with CPI, ending a six-year real terms squeeze on pay.
Continuing falls in food prices gave comfort to shoppers but showed the squeeze on the major supermarkets as they engage in ever more acrimonious competition while discounters Aldi and Lidl gnaw at their market share.
Separate till-roll data from Kantar Worldpanel showed that sales for the 12 weeks to November 9 were 0.2% lower, the first decline since Kantar's records began in 1994.
It comes a week after Asda posted its worst quarterly sales fall in nearly a decade and lashed out at major rivals, accusing them of using panic measures such as voucher giveaways to stem sales declines.
The Leeds-based group fared least badly in the latest Kantar figures with a fall of 0.2% while Yorkshire rival Morrisons dipped 3.3%, Tesco fell 3.7% and Sainsbury's slid 2.5% - while there were more double digit rises for Aldi and Lidl.
Today's overall inflation reading of 1.3% was the 11th month in a row that CPI has been at or below the Bank of England's 2% target. It would have been 0.3% higher were it not for falling food and petrol prices.
The low inflation environment coupled with gloom over the world economy has led economists to push back expectations for when the Bank will raise interest rates from 0.5%. They have been held at that level since 2009.
Should inflation dip below 1% in coming months, as the rate setters believe likely, governor Mark Carney will have to write a letter of explanation to the Chancellor.
Prime Minister David Cameron tweeted: "While global economic risks remain, it's good news for hardworking taxpayers that inflation remains low - meaning more stability & security."
But TUC general secretary Frances O'Grady said: "The first signs of progress on real wages have already been stopped in their tracks."
Latest figures last week showed pay rising at a still below-inflation rate of 1% though stripping out bonuses it was 1.3%. The Bank of England expects total pay to rise by an average of 3.25% in 2015.
Samuel Tombs of Capital Economics said the slight rise in CPI "seems likely to be just a blip in its downward trend".
He said a freeze in gas and electricity tariffs this year was likely to push CPI lower, while the current inflation rate was yet to reflect fully the impact of the recent fall in import or producer prices.
"As a result, CPI inflation is still on course for a sub-1% rate soon that would require Mark Carney to reach for his letter-writing pen, and looks set to remain well below the 2% target throughout 2015."
Markit chief economist Chris Williamson said: "The concern at the Bank of England is that low inflation could turn into deflation, inducing another economic slump as consumers defer purchases in the hope of lower prices in the future.
"The Bank's main priority is therefore to ensure that economic growth remains robust in coming months to stop inflation falling even more than currently projected, which suggests any hike in interest rates remains a long way off."
Economists at HSBC have pushed back expectations for a first rate hike until the first quarter of 2016.
However, Investec's Victoria Clarke still expects the first rise in August next year to allow rate-setters to ease rates up gradually as they mull the likely impact of wage growth on inflation further down the track.