Sharp fall in shop prices

Non-food prices have fallen at their fastest rate in two years, new figures have shown.

The British Retail Consortium (BRC's) Shop Price Index showed that retailer prices fell 2.0% last month - the largest month-on-month drop since December 2005.

The cost of non-food goods dropped by 2.4% compared to the previous year - the biggest fall since 2006. In particular, electricals, books and home entertainment equipment were around 5% cheaper than last year due to December's VAT cut and heavy discounting.

And although deflating more slowly than that of most other goods, food prices continued to fall from their August peak, being some 0.7% cheaper in December than they had been in the previous month.

The price drops slowed overall annual inflation to just 0.5%, down from an annual rate of 2.7% in November.

BRC director-general Stephen Robertson said: "It's clear retailers are holding down shop prices at a time when many of their own costs are increasing.

"The Government shouldn't be adding cost burdens, such as record high business rate increases, at a time when margins are being severely squeezed."