The volume of retail sales last month fell by 0.2 per cent, disappointing expectations of a slight increase. Despite the modest decline, gloom on financial markets quickly gave way to despondency. Share prices fell back sharply and the pound remained weak. The FT-SE 100 Index closed almost 28 points down, at 2387.9, failing to regain losses of almost 39 points earlier in the day. In addition to poor sales figures, analysts blamed continued worries over higher mortgage rates and falling markets overseas.
The drop in sales was led by a decline in clothing and footwear, as new summer lines were apparently hit by poor weather in June. Most other retailers enjoyed broadly unchanged sales, and a more reliable guide to high street spending, taken over the three months to June, showed that sales as a whole rose by 0.6 per cent.
Nevertheless the Retail Consortium warned the Government that the housing slump, rising unemployment and business failures were undermining confidence.
In addition, trade figures for June strengthened the impression that the economy may be in danger of relapsing back into recession. Imports dropped by more than pounds 200m to pounds 9.76bn, which suggests that companies have ceased rebuilding stocks in anticipation of recovery. Exports fell by just over pounds 300m to pounds 8.84bn, pointing to economic slowdown in Britain's overseas markets. After an estimated surplus of pounds 200m in invisible trade in shipping, tourism, banking and investment earnings, the current account deficit widened almost pounds 100m to pounds 722m.
The picture of gloomy retail sales was backed up by the experience of shopkeepers in Southampton - which like many cities in the South-east has been hit harder by the recession than elsewhere in the country.
Many retailers there reported sales well down on last year. The retailing recession is increasing pressure on city centre shops, already facing tough competition from out-of-town superstores.
'I don't think that anybody in the retail trade expects to see much improvement before Christmas,' said Patrick Hill, manager of the Bargate shopping centre.
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