Consumer spending suffers biggest slump

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The Independent Online

A consumer spending slowdown today looked to have returned with a vengeance after official figures showed retail sales last month suffered their biggest slump for more than 20 years.

The Office for National Statistics said the retail sales volumes fell 3.9 per cent between May and June, the largest decrease since records began in January 1986. It followed a 3.5 per cent sunny-weather inspired sales leap seen the previous month.

Clothing and footwear shops were the worst hit in June, with sales down 6.9 per cent. Food sales also fell 3.6 per cent, the biggest drop since record began.

Economists had been expecting a fall in sales volumes of around 3 per cent last month, following May's shock 3.5 per cent rise.

Consumers have been battling with soaring fuel and energy costs this year, as well as rampant food inflation.

Non-food stores as a whole suffered a 4.5 per cent sales drop between May and June, the ONS said, which was the biggest fall on record.

Sales volumes at household goods stores, which includes furniture and electrical goods sellers, fell 5%, the biggest slump since April 1991 when Britain was in the grip of the last recession.

Retail giant Marks and Spencer has notably been experiencing a sales slowdown in recent months, warning earlier this month that like-for-like sales fell 5.3 per cent during the quarter to June 28.

Total retail sales volumes rose 2.2 per cent in June compared to the year before, the ONS data showed, the lowest rise since February 2006.

Average weekly value of sales in June came in at £5.1 billion, 3.4 per cent higher than the previous year.

The ONS data highlighted the impact of food inflation, with June's price deflator, which measures the annual change in price in the retail sector, rising to plus 0.5 per cent.

This is the first positive figure since June last year, and was driven solely by higher food prices, which were 4.6% up year on year, the data showed.

Every other sector experienced price falls, with non-store retailing - including mail order businesses - worst-hit with a 6.4% fall.

The ONS data is in line with sales figures from the British Retail Consortium, which said like-for-like sales figures fell 0.4 per cent during the year to June.

May's 3.5 per cent hike recorded by the ONS was put down to the warmest May on record. It contrasted with monthly falls seen during the previous two months, in line with a general consumer slowdown.

This year's sales fall could reduce pressure on Bank of England policy-makers to hike interest rates to dampen inflationary pressure from consumers.