Ominous signs of a high street slowdown

SHOPPERS may have begun deserting the high street according to new figures that show the first monthly fall in spending since January.

Sales slipped 0.5 per cent in August, the Office for National Statistics said, wrongfooting City analysts who had forecast a rise of about 0.3 per cent after months of resilient growth.

The data showed the fall was across-the-board in both food and non-food. Shehan Mohamed, economist at CEBR, said: "The latest retail figures continue to highlight the frailties of the UK consumer, as average earnings growth remains below inflation and consumers are cautious over impending public spending cuts."

Over the year, retail sales volumes rose just 0.4 per cent - a fifth of the 2 per cent annual growth that analysts had forecast.

Vicky Redwood at Capital Economics said the August fall "could be the first sign that the surprising resilience of consumer spending could be coming to an end. The pressures on consumers are clearly mounting".

Food, fuel, clothing and household goods all suffered setbacks last month, as the ONS also revised down July's monthly growth to 0.8 per cent from the 1.1 per cent initially reported.

On the currency markets, the pound touched a seven-week low of 84.03p against the euro, as the weak data was seen as further ammunition for the Bank of England to keep interest rates at historic lows.

The data showed that clothing and footwear sales decreased 0.4 per cent month-on-month in August after two successive months of robust growth averaging 1.4 per cent.

Food retailing sales fell 0.5 per cent, showing consumer concerns are also hitting the recognised most "defensive" sector of the high street.

Analysts said they still expected the UK economy to outgrow the eurozone next year, but that the latest data showed the recovery remained fragile and subject to concerns about over the impact of the austerity programme.

The details of public-sector cutbacks are expected to be announced by the Chancellor on 20 October.