April 7/London/Press Association Mediapoint -- Food inflation is at its lowest level for more than three years, figures from British Retail Consortium (BRC) showed.

The organization's latest shop price index showed food prices were 1.2% above a year ago in March -- the lowest since the survey began in December 2006.

Non-food inflation also fell sharply, as retailers vying for business were reluctant to pass on January's VAT hike, the BRC added.

The figures showed fresh food inflation edging up over the month, but the annual rate of increase among foods which can be stored at room temperature -- such as bread -- was at its lowest level since September 2007.

The BRC highlighted slowing commodity prices as the reason behind the easing inflation, with the cost of corn and wheat 7.1% and 8.6% down on a year earlier. Coffee prices fell 14.3% year-on-year.

BRC director general Stephen Robertson said, "The competitive battle is even fiercer than usual, as retailers fight it out to overcome the reluctance of customers to spend caused by pre-election uncertainty.

"Falling shop price inflation is particularly welcome relief for consumers as they face sharp rises in other living costs, such as fuel."

The BRC added its findings supported Bank of England evidence from December which suggested that less than half of all firms were planning to pass on the increase.

The organization added, "It suggests that conditions of weak consumer demand and spare capacity in the economy are bearing down on prices and consequently retailers are absorbing a large slice of this inflationary pressure into their margins."  

From the April 12, 2010, Prepared Foods E-dition