Shop price inflation slowed to 1.1% in June from 1.5% in May, the lowest rate in two and half years, according to the BRC-Nielsen Shop Price Index.
Food inflation fell to 3.5% in June from 4.3% in May while deflation in non-food continued for a fifth consecutive month, accelerating to 0.3% from 0.1% in May.
The BRC said that the figures showed that retailers were holding back prices as commodity cost pressures ease.
Stephen Robertson, British Retail Consortium director general, said: “Crude oil prices are down a quarter on three months ago with food commodities, such as coffee and sugar, falling sharply over the same period. In a highly competitive market, retailers are rushing to reflect those drops in good deals for customers. At the same time, weak consumer demand continues to drive deep and heavily targeted discounting, particularly among non-food goods.
“With real disposable incomes still dropping, let’s hope there’s more downward pressure to come from past falls in commodity prices working through to inflation.”
Mike Watkins, senior manager for retailer services at Nielsen added: “Prices continue to fall across retail stores which will be welcome news for the many households needing to make savings on household bills and bigger ticket items in particular. However, it’s double-edged for food retailers where demand remains weak. The unpredictable summer weather has dampened recent growth but, with the summer of events underway, the fall in inflation should give a boost to shopper spend.”