Shop price inflation dropped 2.9% this month, down from 4.3% in December as supermarkets continue to drop prices.
The figures from the British Retail Consortium (BRC) mark the lowest recorded level of shop price inflation since May 2022.
Food inflation also saw its lowest rate since June 2022 at 6.1%, while fresh food inflation slowed to 4.9%.
BRC chief executive Helen Dickinson noted that tea and milk were among the products that saw a fall in prices in January, however alcoholic drinks continued to be more expensive following a rise in alcohol duties.
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She added: “Non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spend amidst weak demand.
“Rising geopolitical tensions will also add to uncertainty and costs in supply chains.”
NielsenIQ head of retailer and business insight Mike Watkins said: “Shoppers are seeing savings at the checkout, with non-food retailers on promotion and food retailers continuing to reduce prices when the costs of goods fall.
“However, consumer demand remains fragile as most households are yet to feel better off after nearly two years of inflation.”
Many of the UK’s leading supermarkets kicked off the New Year with rounds of price cuts, including Aldi which lowered prices by up to 13% on products such as fruit and vegetables, fish, and household cleaning products last week.
Earlier this month, M&S invested in the price of over 200 products and Tesco slashed prices across more than 150 items to help customers budgets go further.
