Outlook fragile as retail sales fall for a second month in a row

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High street sales fell for a second consecutive month in June, and although the planned VAT increase in this week's Budget may prove a short-term boost, the longer-term outlook is fragile.

Thirty-nine per cent of retailers reported lower sales this month, while only 34 per cent reporting a increase, according to yesterday's Distributive Trades Survey by the Confederation of British Industry (CBI). Although the balance was up since an unexpected collapse in May, it was still at minus 5 per cent.

Sales of footwear and leather goods were worst hit, followed by hardware, china and DIY. Groceries and durable goods rose, boosted by football fans stocking up on food and drink and investing in new televisions, the CBI said.

Raising VAT from 17.5 per cent to 20 per cent in January could be a short-term boost. Ian McCafferty, the CBI's chief economist, said: "News that it will not take effect until January may well encourage some advance spending."

But Vicky Redwood, at Capital Economics, said: "With other tax rises and spending cuts, the overall outlook for consumer spending still looks pretty weak."

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