Shop price inflation was slower than expected in January, rising 2.3% as many retailers held off passing on the VAT rise that came into effect at the start of the year.

The marginal increase in overall shop price inflation was driven by non-food which reported its highest annual inflation rate since December 2006, up 1.9% on last year, according the the BRC Nielsen Shop Price Index.

Food inflation slowed for the first time since August, up 2.9% in January compared to 3.7% in December, largely driven by the slowdown of inflation of fresh food.

BRC director general Stephen Robertson said: “January’s VAT increase was lost among a huge number of discounts and promotions. We would have expected non-food inflation to be higher because of the VAT rate reversal, but many shops held off passing the extra costs onto their customers,” he said.  

“Fierce competition, in the face of weakening consumer demand and uncertainty about the recovery, is keeping shop prices down,” Robertson added.