According to the latest BRC-Nielsen Shop Price Index, overall shop prices reported deflation for the twentieth consecutive month, decelerating to 1.7% in December, after reporting deflation of 1.9% in November.
Food reported annual inflation of 0.1% in December after reporting deflation of 0.2% in November.
On a 12 month average basis, the Shop Price Index reported deflation of 1.6%.
Non-food deflation slowed marginally to 2.8% in December from 2.9% in November.
BRC Director General, Helen Dickinson, said: "Prices in Britain's shops have continued to tumble, this month by 1.7 per cent. This is the twentieth consecutive month that customers have been able to go to the shops, fill their baskets and pay less for their goods than the year before. This is an incredible run of good fortune for consumers and in the medium term at least looks set to continue. A number of key commodities in the retail supply chain (in particular, oil) have fallen dramatically recently and the impact of these falls will continue to make its way through to shop prices for some time to come.
"This significant run of deflation isn't all bad news for retailers. The Producers Price Index (which tracks the cost of raw materials to producers) is deflationary so retail business have seen significant decreases in their own input costs. However, fierce competition – the hallmark of the UK retail industry – has seen these savings passed on directly to consumers. It's a win-win scenario that many are predicting will continue long into 2015."