Shop prices saw their deepest deflation since February 2007, according to the latest price index from the British Retail Consortium.

Annual deflation was reported for overall shop prices, for the second consecutive month, in its June 2013 price index, falling 0.2% from 0.1% in May.

However food inflation increased to 2.7%, from 2.4% in May. Non-food reported annual deflation of 1.9% in June from 1.5% in May.

Helen Dickinson, director general, British Retail Consortium, said: “Shop prices fell at their fastest rate since February 2007, building on the downward trend that we saw in May.

“The deflation is driven entirely by non-food, a reflection that the summer sales are well under way as retailers battle it out to shift stock and compete for customer spending.”

She said that food inflation had edged up marginally, driven by slight increases in ambient and fresh food prices. “However, I would expect it to remain fairly stable over the medium term,” she added.

Commenting on the increase in food inflation, Mike Watkins, head of retailer and business insight at Nielsen, said: “After a three-year low point in shop price inflation and a slight recovery in volume growth in the last six months, and with promotion spend plateauing, some seasonal cost price increases are again filtering through to the shelf.

“If this trend continues, it will set the shoppers’ agenda for the next six months and food retailers may need to focus on simple price cuts as well as multi-buys in order to drive footfall and spend.”