High street stores suffer slowdown in sales

The struggle on the high street has been underlined, with official figures revealing a greater-than-expected slowdown in retail sales.

Volumes increased month-on-month by 0.2 per cent in July, compared with a revised 0.8 per cent boost in June, the Office for National Statistics (ONS) said. Economists had been expecting a 0.4 per cent rise.

Household goods stores, clothing and footwear shops, and non-store retailing, which includes internet and mail order sales, all suffered as cash-strapped consumers reined in their spending.

The retail sector has been hit by a squeeze on household budgets – driven by muted wage growth and high inflation.Stores such as Comet have been among the worst-hit, as people forgo purchases of big-ticket items such as fridges, TVs and cookers.

Retailers have had a torrid year, with the likes of fashion chain Jane Norman, interior designer Habitat and wine merchant Oddbins all falling into administration, while Mothercare, HMV and chocolatier Thorntons have announced store closures.

The ONS said it appeared retailers had brought in their summer sales earlier than usual, in May or June, to entice frugal shoppers. But there was not enough evidence to suggest they had dragged the sales season on in July as volumes suffered.

Chris Williamson, chief economist at financial services information company Markit, said weak spending in the third quarter had heightened the risk of a double-dip recession.

He said: “People are worried about job security, and incomes are being squeezed by higher prices. After inflation, real take-home pay is falling by over 2 per cent per annum.

“With consumer spending accounting for around two-thirds of the economy, the weak retail sales data suggest that economic growth remained very subdued at the start of the third quarter and highlight how close the UK economy is to sliding back into recession.”