The prices have been continuously falling for the last nine months and are lowest since the index began in December 2006.
The January 2014 index also found that food inflation slowed to 1.5% from 1.7% in December, and non-food deflation increased from 2.3% in December 2013 to 2.7% in January.
British Retail Consortium director general Helen Dickinson said shop prices are falling at their fastest rate for seven years, a new record for their data.
"January is always a key month for sales and promotions but discounts has been deeper and more widespread than last year and we are seeing this trend continuing. Our figures show that there have been particularly good deals to be had in clothing, furniture and electrical items this month as retailers prepare for their new collections," Dickinson added.
She further added that food retailers have managed to keep prices low and with relatively stable commodity prices, the forecast looks good in general.
Nielsen retailer and business insight head Mike Watkins said the start of 2014 has seen a continuation of both slow retail growth particularly in food, and a continuation of slowing inflation.
"With the first few weeks of January a time when many households take stock of personal finances, the fall in shop price inflation will be a welcome boost for consumers," Watkins added.