Consumer crisis: Record fall in retail sales follows May shopping spree

Consumer crisis: Record fall in retail sales follows May shopping spree

Retail sales suffered their biggest slump on record last month as shoppers reined in spending sharply after May's high street splurge, figures showed yesterday.

Sales fell by a bigger-than-expected 3.9% in June, more than reversing May's 3.6% jump, the Office for National Statistics said. The drop was the worst since records began in 1986; May's figure was the biggest increase.

The ONS said consumers had sharply reduced spending after their binge in May, which coincided with a period of sunny weather in an otherwise wet spring.

The drop in sales last month was broad-based, the ONS reported, with food sales tumbling 3.6% on the month, more than reversing May's 3.3% rise. It is not thought that the dip was linked to the rising price of meat, grains and dairy produce. Food sales tend to be volatile, but were down by 0.2% in the latest three months, the first fall for nearly a year.

"The retail sector is clearly feeling the pain as the UK consumer begins to batten down the hatches," said Gavin George, head of retail at consultants Ernst & Young. "The UK consumer is 15% worse off than they were five years ago.

"Furthermore, the pace of the squeeze on the consumer has accelerated rapidly over the last year, driven by massive hikes in petrol prices and utility bills."

The June figures also showed sales were up a meagre 2% year-on-year, the smallest annual increase since February 2006.

Vince Cable, the Liberal Democrat Treasury.....continued below

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spokesman, said: "This is yet further evidence that the massive personal debt and spiralling food and fuel prices are now hitting people's pockets.

"People and businesses are now paying the price for an economy which Gordon Brown allowed to get dangerously out of control."

David Page, an economist at Investec bank, said that while the figures removed some of the confusion surrounding the retail backdrop, "they only confirm that things are as bad as we feared".

"We maintain that a poor outlook for households, in which we expect to see an increasing pace of rising unemployment, is likely to see the high street under further pressure in the second half of the year," he said.

The ONS data showed clothing and footwear, and household goods stores suffered particularly steep falls, down 7% and 5% respectively. There was even a small fall in the "non-store retailing" category, which includes internet sales.

On a three-month comparison, which irons out monthly fluctuations, overall sales were up 0.6% from the previous three months and 4.4% from a year earlier. Both figures were the weakest so far this year and chimed with surveys from the British Retail Consortium and the CBI suggesting that consumption was waning in the face of high petrol and food prices and slow growth in wages.

"The economic fundamentals remain weak with consumer confidence at all-time lows and the housing market on a downward trend," said BRC director-general Stephen Robertson. "But retailers are not taking this lying down. Competition is benefiting customers as retailers fight back with high-profile price cuts and promotions.

The ONS data also showed that the so-called "deflator", a measure of inflation on the high street, had picked up to 0.5%. That was the first positive reading since June last year and was driven by food prices, which were up 4.6% year on year.