Overall shop price inflation edged up marginally in November to 0.2%, according to the BRC-Nielsen Shop Price Index.

Food inflation increased to 2.8% from 2.5% in October and September. Annual non-food deflation was 1.2% in November from 1.3% in October.

BRC director general Stephen Robertson said: “Overall shop prices are virtually the same as last year.

“The prices of non-food goods have been falling for a whole year now, with the biggest drops in clothing, footwear and electricals. Food inflation has plunged by over two-thirds from its peak in August 2008. Into 2010, we expect food inflation to be far more stable than over the last 18 months.”

He said fierce competition at Christmas is keeping shop prices down as stores fight it out with discounts and promotions.

He added: “Low shop prices are contributing to reviving consumer confidence. Something the Chancellor should remember if he is considering piling new costs onto retailers in the pre-Budget Report. That would only fuel inflation.”

Nielsen senior manager of retailing services Mike Watkins said: “Shop price inflation is now stable but shoppers continue to be cautious about spending. As a result we are seeing more price cuts, deeper promotions and increased benefits from loyalty schemes in particular by the major food retailers. Christmas is a battle for shopper loyalty.”