By Daniel Hunter

Overall shop prices reported annual deflation for the first time in over three and a half years, falling 0.1% after a 0.4% rise in April. Food inflation slowed to 2.4% in May from 2.9% in April. Non-food reported annual deflation of 1.5% in May accelerating from 1.0% in April.

"Shop prices fell in May, the first time our measure has shown deflation for over three and a half years," Helen Dickinson, British Retail Consortium Director General, said.

"It bears out yesterday's sales figures, which showed that retailers used a range of promotions and offers to drive demand and shift seasonal stock which didn't sell well during the prolonged cold snap earlier in Spring.

"Non-food deflation accelerated to its lowest level in almost four years, a reflection of the intense competition to capitalise on improving consumer confidence and the late onset of warmer weather. Widespread discounting in the furniture sector drove strong sales as customers were feeling more positive about making major purchases but still on the hunt for a good deal.

"Promotional activity was also a key factor behind food inflation slowing to its lowest level since June 2010. These lower levels were driven by past falls of commodity costs, especially wheat and corn, which has helped to ease price pressures for breads and cereals and meat through falling animal feed prices in recent months.

"Times remain tough, but it seems that retailers are reading the market well and doing what they can to offer customers the best possible value on their shopping."

Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: "With a squeeze on real incomes continuing in 2013, falling shop prices will be welcomed by cash-strapped shoppers.

"However, with levels of recent consumer spend also being impacted by the weather, there continues to be a dependency by many retailers to use vouchers or coupons to drive footfall. Nevertheless, with food inflation slowing as we finally start summer, the outlook for the next three months is looking much brighter."

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