Caution abounds as retail sales growth slows

Retail sales growth has slowed in May - although it came in ahead of market expectations - and businesses are cautious about the outlook for progress next month, according to the CBI's latest distributive trades survey.

The survey found that 41 per cent of retailers saw the volume of sales rise in the two weeks to 16 May, while 23 per cent said they fell compared to the same period last year.

The positive balance of +18 compared to +21 in April although it was higher than analysts' expectations of +10.

Judith McKenna, chief financial officer of supermarket chain Asda and chair of the survey's panel, said growth was expected to remain muted next month.

"There is evidence that things have tightened because people have spent more than they perhaps intended to in recent weeks and are cutting back.

"People don't have a lot of confidence about what's coming round the corner. 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.

Howard Archer, economist at IHS Global Insight, said the figures showed consumers were under significant pressure.

"Although the CBI survey indicates that retail sales held up better than feared in May, the underlying trend still indicates that consumers have become significantly less willing - and able - to spend in recent months. "

The figures came as Bank of England policymaker Paul Fisher said he was "nervous" about the strength of household demand against a backdrop of falling real wage growth.