Shop price inflation rose just 0.1% last month, as retailers try to take the sting out of shopping for consumers and keep them spending.
Overall shop price inflation increased to 2.1% in December from 2% in November, while non-food inflation increased to 1.1% from 0.9% in the previous month. Food inflation, however, remained unchanged at 4% in December.

British Retail Consortium director General Stephen Robertson said: "Retailers are protecting British consumers from the full-force of global commodity cost increases, with unprecedented levels of discounting taking the sting out of grocery shopping... Overall shop price inflation is well below the wider Consumer Price Index, though price increases in some non-food good pushed that figure up slightly compared with November. That's consistent with warnings from some retailers that inflationary pressures are working through to prices."

The BRC added that next month's Shop Price Index is expected to show the initial impact of the recent VAT hike but that retailers will do their best to put a cap on price increases and keep shoppers spending. "Retailers know that customers are worried about their jobs and personal finances. The competitive retail environment will mean stores go on doing all they can to limit price rises."

Nielsen senior manager, retailer services Mike Watkins said: "Price discounting for Christmas was deeper and began earlier, which has sowed down the rate of increase in shop prices in December. As there has been no easing of the general upward pressure on cost prices, retailers have had to work even harder to encourage cash-strapped customers to keep shopping."