Low consumer demand and stiff competition have seen shop prices drop by their highest rate in more than a year.

Overall prices fell by 0.6% year-on-year in September, up from 0.4% in August and the highest rate of decline since May last year, according to the BRC-Nielsen Shop Price Index.

Price of non-food items fell by 1.7%, also higher than August’s 1.5% decrease.

Food inflation eased to 1.1% from 1.6% in August, the lowest rate since April last year, reflecting lower domestic prices for vegetables and lower global prices for meat.

While the figures are good news for shoppers, the British Retail Consortium (BRC) warned that retailers were feeling the squeeze of falling demand.

BRC chief executive Helen Dickinson said: “While consumers may welcome lower prices, falling consumer demand is squeezing retailers’ already tight margins.

“With business costs continuing to rise – including business rates, wage bills, and pension costs – the high street risks more big name closures.

“Reform of business rates remains the most effective way Government can support the retail industry – and they should grasp the opportunity with both hands.”

Mike Watkins, head of retailer and business insight at Nielsen, said: “With consumers feeling uncertain about spending, retailers continue to focus on limiting price increases coming through the supply chain.

“Competition for discretionary spend will intensify across all channels as we head towards the end of the year and we anticipate more promotional savings for shoppers and inspiring media campaigns that help to drive incremental sales.”

Josie Clarke is PA Consumer Correspondent.