RTTNews - British shop price inflation dropped further in May, the British Retail Consortium said Wednesday.

Year-on-year, the shop price index rose 1.3% in May slower than the 1.4% increase in the previous month. This was the second consecutive month of decline in shop price inflation, the BRC said.

Food prices increased 6.4%, marking the lowest food inflation rate thus far this year. This was largely driven by the biggest fall in fresh food inflation since the index began in December 2006, the BRC Director General Stephen Robertson said. Fresh food inflation declined for the third straight month.

Non-food prices dropped 1.3%, down for the sixth month in a row, thanks to big discounts and lower value-added-tax. Prices for electrical goods and clothing declined the most.

Non-food prices fell again but more slowly, suggesting that exchange rate depreciation is continuing to influence the prices of many imported non-food products, Mike Watkins, Senior Manager, Retailer Services at Nielsen said.

Month-on-month, the shop price index rose 0.5% in May, reversing a 0.5% decline in the previous month. Food prices and non-food prices increased 0.2% and 0.7%, respectively.

Robertson said food inflation has been falling since March, signalling that the worst food price gains are over. Significant falls in the cost of commodities such as oil, and the pound's recent stabilisation have helped ease inflationary pressures, he added.

The UK consumer price annual inflation eased to 2.3% in April, a level last seen in January 2008, from 2.9% in the previous month, official data had shown.

Elsewhere on Wednesday, a closely watched survey revealed that British consumer confidence rose to a six-month high in May on expectations that the economy may recover from the recession.

The National Building Society said its consumer confidence indicator climbed to 53 in May from 51 in April, the highest since November 2008. Meanwhile, economists had forecast a reading of 52.

The UK economy shrank 1.9% in the first quarter, the worst contraction since the early days of the Margaret Thatcher government in 1979.

The Bank of England is widely expected to leave its key interest at a record low of 0.5% on Thursday. Monetary easing and pumping new cash into the economy are expected pave the way for a recovery.

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