by business editor Trevor Sturgess

It may not feel like it to shoppers, but prices fell in October, thanks to intense supermarket competition.

Overall shop price inflation fell to 2.1% in October from 2.7% in September, according to the BRC-Nielsen index.

Food inflation dipped from 5% to 4.2%, while non-food items were 0.8% cheaper, down from 1.3% in September.

Despite the fall, shoppers held on to their money as food and non-food sales growth slowed.

Stephen Robertson, BRC (British Retail Consortium) director general, said: "The supermarket price war has had a dramatic effect.

"As the competitive battle intensifies, retailers are holding down shop prices despite their own costs, including energy, property and what they pay suppliers, going up."

High inflation was coming not from shops but rising utility, fuel and insurance bills, he said.

He forecast that shop inflation should be stable until the end of the year, despite pressures from the eurozone debt crisis. The impact of the VAT hike to 20% in January would then drop out of the annual comparison, he said.

The BRC-KPMG Retail Sales Monitor showed sales of big-ticket items suffering the most, while clothing and footwear were hit by mild weather.

Homewares remained tough and often deal-driven.

Uncertain prospects for personal finances and the economy continued to make shoppers careful, giving priority to essentials and replacements over discretionary items.