By Daniel Hunter

Overall shop price inflation fell to 1.2% in February from 1.4% in January.

Food inflation increased to 4.2% in February from 3.7% in January. Non-food reported deflation of 0.7% in February.

"While fuel and utility bills are eating up an ever-bigger proportion of household budgets, many goods sold by retailers now cost less than they did a year ago," Stephen Robertson, British Retail Consortium Director General, said.

"Clothing, electricals and furniture are all cheaper than at this time in 2011 as retailers respond to the squeeze on personal finances by cutting prices, reducing their own underlying profitability. Non-food as a whole showed annual deflation for the first time since November 2009, contributing to the lowest overall shop price inflation for nearly two years.

"Increased transport costs have edged food inflation up slightly while money-off-your-overall-bill promotions are good for customers but not reflected in shelf prices.

"When shop prices are up by just 1.2 per cent there's even less justification for the eye-watering 5.6 per cent business rates rise planned for April. Reducing this huge hike in trading costs should be a priority for the Budget."

Mike Watkins, Senior Manager, Retailer Services, Nielsen said consumer confidence remains fragile.

"Promotional activity has been sustained over the last three months as consumer confidence remains fragile," he said.

"Households are coping with falling disposable income as fuel and energy costs are still rising so retailers are having to work hard to encourage customers to spend.

"The recent rise in oil prices and past rises in commodity prices had an impact on food inflation but non-food shop prices are falling, which reflects consumers' unwillingness to spend as well as the year-ago increase in VAT coming out of the comparatives."

Join us on
Follow @freshbusiness