Shares in Tesco and J Sainsbury were lower in morning trading after fresh figures pointed to growing competition on supermarket shelves.
Food inflation fell to 2.5% in September from 2.8% in August, according to the BRC-NIQ shop price index.
The British Retail Consortium put that down to competition between retailers and promotions on meat and dairy.
That is good news for shoppers but less so for investors, as it suggests supermarkets are cutting prices while their own costs keep rising.
In short, margins look squeezed from both sides.
Costs piling up
Overall shop price inflation eased to 1.4% from 1.5%, though that remains above the three-month average of 1.3%.
Fresh food inflation dropped to 2.6% from 3%, while ambient food, which includes tinned and packaged goods, slowed to 2.2% from 2.5%.
Non-food inflation edged down to 0.8%, helped by heavy discounting on back-to-school essentials such as stationery, shoes and electricals.
Not everything got cheaper. Poor harvests across Europe pushed up fruit prices, while high global commodity prices kept chocolate and sweets expensive.
Budget warning
BRC chief executive Helen Dickinson said retailers had absorbed "wave after wave of extra costs" but there was a limit to what they could shoulder.
Higher business rates arrive in April, on top of rising employment costs, energy bills and packaging taxes.
Dickinson called the Budget "a fork in the road" and urged the Chancellor to freeze the rates rise and exempt shops from the business rates surtax.
Otherwise, she warned, more costs will end up being passed on to consumers.
In morning trading, both Tesco and Sainsbury were off around 1%.
