High street sales flat as revival fizzles out

Retail sales growth ground to a halt between July and August as a mini-revival on the high street fizzled out, official figures showed today.

Sales volumes were flat during the month in the weakest performance since May, the Office for National Statistics (ONS) said.

The biggest decline was seen by clothing stores as demand for summer clothes driven by May and June's hot weather came to an end in August.

The sales performance was slightly below the 0.1 per cent growth predicted and followed weak surveys from the British Retail Consortium and the CBI business group.

The figures underlined the fragile state of consumer finances amid growing fears of unemployment, which has reached a 14-year high of 2.47 million, according to IHS Global Insight economist Howard Archer.

"Consumers still need significant encouragement to put their hands in their pockets and spend, such as particularly attractive offers or good weather," he said.

While sales volumes among mainly food stores was up 0.7 per cent, non-food volumes slipped 0.6 per cent. All non-food sectors showed declines apart from household goods stores, where sales held their ground.

This is likely to be a signal of increasing activity in the housing market as record low interest rates tempt buyers.

Sales volumes are 2.1 per cent ahead of a year earlier but there are further pressures ahead for the sector as the Christmas season looms.

The Government's temporary VAT cut will come to an end in January, putting up prices and probably deterring hard-up shoppers nursing bruised wallets after the festive period.

"We still think that a weakening labour market and looming fiscal consolidation will prompt sales growth to slow eventually," Capital Economics' Vicky Redwood said.