High street sales defy predictions

High street sales have continued to grow in recent weeks, defying predictions of a slowdown in the wake of the royal wedding and Easter bank holidays, figures released today revealed.

A balance of 18% of retailers reported that sales volumes increased in the first two weeks of May, compared with the same period the previous year, according to business body the CBI.

This contrasted with the balance of 1% that previously forecast sales would decline in the period, after a 21% increase the previous month as the shopping spree caused by the royal wedding and bank holidays came to an end.

Although sales figures were better than expected, the CBI warned that growth on the high street is likely to remain slow as household budgets are persistently squeezed, with wages failing to keep pace with rising prices.

A balance of 14% of retailers expect sales volumes to rise next month, roughly in line with a subdued level of growth seen in the high street so far in 2011.

John Cridland, director-general of the CBI, said: "Given these challenging consumer conditions, it is good news that retail sales growth is stable, not falling.

But he added: "High street sales growth is subdued and is likely to remain sluggish for some time."

In the most recent period, grocery and footwear performed well, but the reading for sales of furniture and carpets was negative for the first time in almost a year.

Inflation remained high, with a balance of 63% of retailers saying that prices were up on a year ago, and 62% expect more price hikes next month.

Judith McKenna, Asda chief financial officer and chairman of the CBI distributive trades panel, said: "Family spending power is at a very low level, and with the continuing bite of rising utilities and fuel, we are not likely to see an improvement in this situation any time soon."

The number of people employed by the sector declined, according to the survey, with a balance of 6% of firms reporting a reduction in staffing. A balance of 3% expected a further fall in employee numbers next month.

Vicky Redwood, senior economist at Capital Economics, said: "Sales growth is still significantly down on the rates seen just a few months ago.

"And with the squeeze on household incomes intensifying, we expect spending to suffer further."