Retail sales 'fizzling out'

Retail sales have "fizzled out" in recent weeks and will remain under pressure for some time to come, a gloomy survey from the CBI has warned.

A balance of 2% of retailers said sales volumes fell in the first two weeks of June - the first decline for a year - as anxious consumers cut back on clothing, groceries and big ticket items, the CBI's monthly retail trends survey found.

Consumers are "feeling the pinch" as wages fail to keep pace with the rising cost of living, while future hikes in energy bills are expected to intensify the squeeze, it warned.

Economists said the figures were "very worrying" for the country's growth prospects because consumer spending accounts for 64% of the economy.

The vast majority of retailers selling durable household goods, such as TVs and fridges, reported sales declines, as did those selling shoes and leather goods.

Clothing retailers reported their weakest performance since January 2010, while grocers said sales grew at their lowest rate for more than two years.

A balance of 19% of retailers said trading had been below average for the time of year.

Judith McKenna, chair of the CBI distributive trades panel and Asda chief financial officer, said: "After a year of growth, high street sales volumes fizzled out in June.

"Shoppers are budgeting hard and cutting back on their discretionary spending, such as on clothes and big ticket household goods."

The figures underline the tough conditions on the high street, which has been exacerbated by January's rise in VAT to 20% from 17.5%.

The survey follows official figures from the Office of National Statistics that show that retail sales volumes dipped by 1.4% in May after a surge in April.

The CBI survey has been more cheery until now, showing increases in sales over the past year.

Howard Archer, chief economist at IHS Global Insight, said the survey was "hugely disappointing and very worrying".

He added: "It is apparent that seriously pressurised and worried consumers have put their hands straight back and deep into their pockets having been tempted into temporarily loosening their purse strings in April by the royal wedding, later Easter and very good weather."