SHOP prices increased for the first time in three months in September, despite fierce competition among the major supermarkets, new figures have revealed.

The British Retail Consortium (BRC) said prices on the high street rose by 0.77 per cent in the month as summer sales drew to a close.

Clothing saw some of the sharpest increases as the new season's ranges were introduced into stores, but non-food prices in general edged ahead.

Food prices, however, fell for the third consecutive month, with the cost of staple items such as beef coming down.

Tesco and Sainsbury's have announced £100m worth of price cuts in recent weeks as the battle for market share intensifies.

BRC said that despite the price wars, improved supply had also contributed to the downward pressure on items such as potatoes.

BRC director general Bill Moyes said the figures showed the Bank of England had plenty of scope for its interest rate cut, announced yesterday.

He said: "Although on a monthly basis prices bounced back a bit, following two months of falls, shop price inflation is still well below the general rate of price increases and shows how competitive shops are."