By  on July 8, 2014

LONDON (Reuters)—British retailers saw the biggest annual decline in prices since at least 2006 in June, with cheaper furniture, electricals and clothes as well as a supermarket price war all contributing, an industry group said on Wednesday.

The British Retail Consortium reported that prices in shops fell 1.8 percent last month compared with a year earlier. The decline was the biggest annual drop since the survey began in December 2006.

Food prices were 0.6 percent higher - the smallest gain on record - while non-food prices were 3.4 percent lower, another record fall.

"Fierce competition among grocers has driven food price inflation to record low levels and with some grocers having announced plans to keep prices down, consumers stand to benefit for a while to come," said BRC director-general Helen Dickinson.

British supermarkets have embarked on a widespread price cuts in the face of competition from German discounters, with mixed results. Last month, Tesco reported its largest drop in quarterly sales in 40 years despite price cuts.

Official consumer price inflation - which covers a wider range of goods and services than the BRC measure - fell to a four-and-a-half year low of 1.5 percent in May.

The Bank of England expects inflation to be close to 2 percent for the next two to three years.

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