Clothing and food price wars have driven prices down by the sharpest level since December 2006, new figures have found.

The British Retail Consortium/Nielson Index found overall deflation of food products was 3.2 per cent compared to 3 per cent in February.

Overall food inflation has averaged just 2.1 per cent over the last twelve months.

But fresh food inflation in March fell sharply from 1.5 per cent to 0.6 per cent.

“The continuing deflation we are seeing in shop prices is good news for consumers,” said Helen Dickinson, British Retail Consortium Director General.

“Retailers have been responding to their customers with keen prices and promotions to maintain market share, and March saw the deepest deflation for eight years and the lowest inflation ever recorded for food.

“With food and drink representing 15 per cent of disposable income for the least affluent third of households, retail‘s significant contribution to maintaining standards of living is clear,” she said.