CBI survey shows surprise fall in retail sales in May

The fragility of consumer spending was reinforced by a surprise fall in retail sales in May – the worst figures since the depths of the recession 14 months ago.

Retailers of household goods, DIY products and chemists suffered the sharpest fall in sales in the first two weeks of this month, but clothing sales also fell after three months of consecutive growth. The CBI's Distributive Trades Survey said that a net balance of 18 per cent of retailers posted falling sales, with 48 per cent reporting a drop and 30 per cent posting growth.

The figures were the lowest since March 2009 and much worse than the balance of 17 per cent of retailers who had expected sales to be higher. The drop also contrasts with a positive balance of 13 per cent in April and March, and 23 per cent in February.

Economists said that the cold weather at the start of the month hit the trading of fashion chains and subdued activity in the housing market took its toll on sales of big ticket items.

But Howard Archer, the chief European economist at IHS Global Insight, said: "It may also be that consumers were deterred from spending by the heightened global uncertainty that resulted in a hung parliament and coalition [Conservative and Liberal Democrat] Government." He noted that the CBI's survey was carried out between 27 April and 12 May. Furthermore, retailers are pessimistic about next month with a net balance of 15 per cent expecting sales to fall again.

Ian McCafferty, the CBI's chief economic adviser, said: "Retail conditions look to remain fragile. It appears that shoppers are feeling the pinch again and are being cautious with their purchases, given the squeeze to real incomes from higher prices and only a modest rise in average pay."

The "one ray of hope" is that retail sales in June and July should get a boost from World Cup, particularly if England do well, said Mr Archer.