Food prices fell by 0.2 per cent in September, helping to ease the pressure on consumers and raising hopes that rampant food inflation has peaked, new figures show.

The cost of fresh food dropped by 0.2 per cent last month, while non-fresh goods, such as cereals and tinned items, slid by 0.3 per cent, as falling commodity prices fed through to the supermarket shelves. Food bills at the checkout are still 9.1 per cent higher than in September last year, but this is down from 10 per cent in August, figures from the British Retail Consortium and Neilsen, the market research group, show.

The overall cost of goods in shops remained unchanged during the month, pushing annual shop price inflation down from 3.8 per cent to 3.6 per cent, the first decline since March this year.

However, hopes that inflation may have peaked were dampened by a continuing rise in the cost of non-food items, which increased by 0.1 per cent during the month, the fourth consecutive monthly rise, and by 0.8 per cent year-on-year.

The cost of DIY and gardening equipment rose by 0.4 per cent during September alone, while the cost of clothing and footwear increased by

0.3 per cent, as did the price of furniture and floor coverings. Shoppers stocking up on health and beauty items were luckier, as prices here fell by 0.7 per cent during the month. Electrical goods prices fell by 0.4 per cent, making them 2.5 per cent cheaper than in September last year.

Analysts say that shoppers can expect more cuts in food prices in the coming months as retailers try to boost their sales, passing on cuts in costs, and as competition in the sector becomes fiercer.

Mike Watkins, of Nielsen, said: “Unit sales at the end of August were down on a year ago ... so food and drink retailers will be looking to drive footfall again during October.”

Howard Archer, of Global Insight, the economic consultancy, said: “Slowing activity is starting to dilute the pricing power of manufacturers and service companies.”

Inflation hit a 16-year high of 4.7 per cent in August and official figures for September, due to be published next week, are expected to show that it has spiralled to more than 5 per cent. The Bank of England has forecast that it will start to fall soon, however, and recent falls in oil prices appear to support this view.

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