UK retail prices fall

Shop prices fall for the 13th consecutive month

Shop prices have fallen again in Britain's shops, which is good news for consumers but bad news for retailers.

According to the British Retail Consortium, shop prices fell for the 13th consecutive month in May and were 1.1% lower than May last year.

"Prices have shown a consistent downward trend for more than a year now," said Mark Bradshaw, the BRC acting director general.

"Whilst deflation in the high street is great news for customers, retailers are seeing margins squeezed at the same time as pressure is applied to their operating costs," he said.

The organisation said that food prices fell slightly faster than non-food goods due to lower prices of produce, particularly the price of tomatoes.

But fish prices rose because of supply difficulties.

Good for inflation

The figures can be taken as evidence that the Bank of England monetary policy committee (MPC) does not need to raise interest rates to combat inflation.

Analysts believe that UK interest rates are approaching the peak of the current cycle.

The Bank left its main lending rate on hold at 6% last month.

In April, the committee raised interest rates by 0.25% to 6%, amidst fears that rising house prices and growing consumer confidence could signal inflation.

It has already increased interest rates four times in the past six months to keep inflation under control.

The BRC shop price index compares a basket of 200 commonly bought items.