According to the latest BRC-Nielsen Shop Price Index, covering the period 2-8th January 2018, shop prices remained in deflationary territory, although they eased to 0.5% in January from 0.6% in December.

Shop prices have seen YOY deflation for 57 months now.

Deflation in non-food prices eased slightly – yet, excluding December, deflation was the deepest since March 2017. In January, non-food prices were 1.9% lower than in January 2017, compared to December when prices were 2.1% lower than in December 2016.

Helen Dickinson OBE, BRC chief executive, says: “The fall in shop prices eased off marginally in January but remained in deflationary territory for the 57th consecutive month. It was the same story of divergent price movements for food versus non-food categories from the previous months, albeit with non-food prices creeping ever so slightly towards inflation.

“There are reassuring signs for consumers from the fall in latest input price inflation, that the worst effects of sterling's depreciation have now passed. Global food prices also reported a slowdown in inflation in most categories. But before raising hopes that stretched household budgets will be offered some much needed slack, we need to consider the impact of rising oil prices which, on reaching a three-year high in January, will inevitably add some heat to the rate of inflation in the coming months.

“Meanwhile, even at a slowing rate, inflation continues to outpace wage growth in the UK, the effects of which we saw play out in lacklustre festive sales. With this in mind, it was reassuring to get clarity from the Brexit Secretary last week on a transition period that will allow trading conditions to continue from March 2019, thereby maintaining the choice and availability of affordable, quality products for consumers.”

 Mike Watkins, head of retailer and business insight, Nielsen, adds: "With consumers' willingness to spend weakened by the return of inflation, and shopper sentiment more fragile than a year ago, retailers are continuing to hold back on price increases.

"The good news is that price increases across supermarkets are beginning to slow, and some non-food retailers are also using short-term promotions and offers to encourage shoppers back into store to kick-start demand. Shoppers will continue to look for savings over the next few months as increases to household bills start to hit home, and we expect shop price inflation to remain less than CPI."