Retailers can expect a bad sales report again

Retailers are preparing for further bad news. Key figures to be published tomorrow are almost certain to reveal that consumer spending again disappointed last month, amid fears that the ongoing squeeze on household disposable incomes is set to depress the sector for the rest of the year.

The British Retail Consortium is set to reveal that shop sales in May were much weaker than in April, when, in an unusual combination of circumstances, retailers bucked the economic gloom. Amid a run of bank holidays, a later Easter and a period of unusually hot weather, total retail sales rose 6.9 per cent in April and increased by 5.2 per cent on a like-for-like basis. However, tomorrow's statistics are expected to show that that the pace of recovery on the high street has not been sustained.

The retail trade's figures continue to be highly volatile – April's 6.9 per cent gain was the sector's best performance for five years, but it followed a 1.9 per cent decline in sales during March, the worst result since the BRC began collating figures in 1995.

Ahead of the BRC data, the accountancy firm BDO will say today that, following the "mini-spending spree in April generated by feelgood factors such as good weather and the Royal Wedding", the uptick in sales has not continued into May. Like-for-like sales in May actually fell by 0.1 per cent on the same month last year, its survey of more than 70 retailers found.

Don Williams, the national head of retail and wholesale at BDO, said: "Consumers started to spend in April but we all have less money than a year ago. There are opportunities for retailers but the lack of sales growth shows they cannot rest on their laurels to woo shoppers."

Howard Archer, chief UK economist at IHS Global Insight, said the latest BRC figures would give a crucial snapshot of whether there was any likelihood of a recovery in consumer confidence to drive the whole economy to a better performance during the second quarter of the year, following the disappointing growth seen in the first three months of 2011.

He said: "A substantially softer BRC survey would indicate that pressurised consumers have quickly put their hands back in their pockets after being encouraged to temporarily loosen their purse strings in April."

However, Mr Archer warned that even if this month's figures were better than expected, there was little reason to be optimistic about the summer and autumn. "Whatever the outcome of the May BRC survey, it still seems highly likely that consumer spending will be muted over the coming months as household purchasing power remains under severe pressure from high inflation, low wage growth and tighter fiscal policy," he said. "In addition, unemployment is still high and debt levels are elevated."

The latest sign of testing trading on the high street emerged last week when the young fashion chain Jane Norman, which has more than 200 shops and employs about 1,600 staff, was put up for sale by its lenders.

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