Retail sales volumes deteriorate

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A tough summer for high street retailers showed no signs of improvement today after a survey pointed to lower-than-expected sales in July.

With shoppers still squeezed by rising food and petrol prices, the CBI said 38% of retailers saw sales volumes deteriorate on a year ago in the period between June 28 and July 19. About 33% reported an improvement, leading to a balance of minus 5% and the weakest trading performance since June 2010.

Retailers are also braced for sales volumes to fall at a faster rate next month, the CBI added.

Judith McKenna, chairwoman of the CBI's distributive trades panel, said shoppers were either cutting back or making their declining spending power go further.

She added: "With consumer confidence fragile, UK retailers continue to face challenging times."

The decline in July was driven by the first fall in grocers' sales volumes in 30 months, while sales of footwear and leather, durable household goods and hardware and DIY also fell sharply.

The CBI said the three-month moving average of sales volumes, which smoothes out monthly peaks and troughs, weakened to plus 4%, compared with plus 12% in June.

Analysts said the survey confirmed fears that the early start to the summer sales in June was only a temporary fix for the industry.

It will also add to fears over the pace of the UK's economic recovery, which saw growth of just 0.2% in the second quarter and looks to be under further pressure at the start of the third quarter.

The CBI's latest survey of the manufacturing sector, released yesterday, showed a balance of 8% of factories saw new orders increase in the three months to July, an easing in the pace of growth in the previous five quarters.

Vicky Redwood, senior UK economist at Capital Economics, said: "Today's survey clearly echoes yesterday's industrial survey in suggesting that the economic recovery has failed to pick up pace at the start of the third quarter."