High street stores see sales plunge

The high street remained under intense pressure in May as sales plunged at their fastest pace in more than a year.

There was no sign of an upturn after retailers were hit by bleak weather in March and a subdued performance over Easter, CBI figures showed. It meant retail activity has weakened persistently so far in 2013.

Despite hopes for improvement in the wider economy, firms reported falls in clothing and footwear sales, although the grocery sector was flat and furniture, carpet and recreational goods sales lifted.

The survey of 69 firms found there were modest hopes for a better performance next month, but that plans for investment among retailers were at their weakest since the start of last year.

Overall, around 23% of companies said sales volumes were up on a year earlier and around 33% said they were down, giving a rounded balance of -11% - the lowest since January 2012 and a worse decline than expected last month.

It comes after latest official figures showed households being squeezed with wages growth of 0.4% at a level well below the rate of inflation.

Barry Williams of Asda, chair of the CBI's survey panel, said: "Retail sales growth has weakened since the start of the year as households continue to feel the pinch, with wages failing to keep pace with the cost of living.

"There is positivity from retailers this month, however, with sales expected to rise in the coming months."

The data fuelled fears that overall growth could be held back, with consumers remaining reluctant to open their wallets again, and that the malaise appears to run deeper than a temporary setback caused by the weather.

Figures out yesterday suggested that the overall services sector - the powerhouse of the wider economy - was improving, led by a surge in the performance of hotels, bars and restaurants.

But today's survey shows that among retailers, conditions are still bleak.

Orders with suppliers compared to a year ago were down, with a balance of minus 25%, which is the lowest since November 2011.

Overall, a 10% balance expected sales volumes to go up in June with a similar balance of optimism for the next quarter.

But retailers appear reluctant to invest, with a negative balance of minus 23% planning to invest over the next year compared to the previous 12 months - the lowest figure since February 2012.

Howard Archer, chief UK and European economist at IHS Global Insight, said the survey was "a bit of a jolt to growth hopes". Official data from the Office for National Statistics has already shown retail sales down 1.3% in April.

He said: "While retail sales are clearly being hindered by largely disappointing weather limiting sales of summer fashions and some outdoor goods, the current softness in sales appears to run deeper than this.

"Clearly, how much consumers spend over the coming months is crucial as to whether the economy can build on the 0.3% quarter-on-quarter growth achieved in the first quarter and the prospects for this look mixed."

PA