Belfast Telegraph

High street hit hard as retail sales take a dive

By Philip Whiterow

A hangover from the previous month's royal wedding, Easter and run of bank holidays sent retail sales tumbling last month, official figures have revealed.

Retail sales volumes dropped by 1.4% month-on-month in May, the Office for National Statistics (ONS) said, as food stores and household goods retailers both saw sales slide.

Food stores saw the first decline in volumes for 14 months as fuel prices and the knock-on of the current economic environment hit spending and reversed a record performance in April.

The figures were much worse than City predictions for a decline of between 0.6% and 0.9%.

May's decline also slashed year-on-year volume growth to just 0.2% from 2.4% in April, a figure which was revised lower today from 2.8%.

The ONS said the absence of April's special events affected the figures but added that consumers cutting back as a result of increasing fuel prices and uncertainty over pay and job security also had an impact.

Food store volumes fell by 3.5% year-on-year but the value of sales rose by 1.7%, with retailers lifting prices by 5.3% to claw back some volumes.

Furniture, electricals goods and DIY shops also saw volumes decline, with a 6% drop in May on last year, although the comparative period was boosted by pre-World Cup spending.

Vicky Redwood, an analyst at Capital Economics, said: "We expect this trend to worsen as households respond to the intensifying squeeze on their real pay. We continue to think that overall household spending will drop by about 1% this year."

Today's figures show that for every pound spent in the retail sector, 42p is spent in food stores.

The British Chambers of Commerce said it now forecast that GDP will grow by only 0.3% in the second quarter of 2011, much less than official and City analysts are predicting.

Chief economist David Kern said: "Given the pressures facing businesses and consumers, and with the Government's fiscal austerity programme continuing to bite, it would be a mistake to raise interest rates.

"But more must be done to sustain growth and empower businesses to create jobs, export and invest. Productivity has fallen significantly since 2008 and recouping these losses must be a key policy priority."

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