Food inflation fell to a three-year low and overall shop price inflation slowed in March to 1.2% from 1.7% in February according to the latest figures from the British Retail Consortium (BRC).

Food inflation slowed marginally to 1.2% in March from 1.3% in February, while non-food inflation slowed to 1.3% in March from 1.9% in February.

Annual food price inflation is now at its lowest since the series began in December 2006, with fresh food inflation up slightly to 0.5% in March from a record low of 0.3% in February and the ambient category slowed for the third consecutive month to 2.2%, from 3.6% in February. This is the lowest annual inflation rate since September 2007.

Deflation continued in other categories. In the clothing and footwear category deflation increased marginally to 0.9% from 0.8% in February, while the annual inflation rate in the furniture and floor covering category slowed to 1.0% in March from 1.8% in February amid continuing concerns over the domestic housing market.

Deflation in the electrical category slowed to 2.0% from 2.5% in February. The major purchases index fell one point and is still only marginally better than a year ago. With the World Cup starting in June it is likely that discounts and promotions will be used to drive the sales of flat-screen televisions.

Annual inflation in the DIY, gardening and hardware category slowed in March to 6.5% from 7.6% in February. This is the lowest level of inflation reported since November 2009 and is lower than the three-month average of 7.3%.

Stephen Robertson, BRC director general, said: “The competitive battle is even fiercer than usual as retailers fight it out to overcome the reluctance of customers to spend caused by pre-election uncertainty.”

Mike Watkins, senior manager, retailer services, Nielsen added: “Retailers have needed to drive footfall with increased promotional activity pre-Easter and also to compensate for the increase in VAT. Overall the consumer remains cautious about spending.”