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Consumer spending is faltering, claims CBI

Consumer spending showed signs of faltering yesterday after the CBI business group reported that UK high street sales fell to a 14-month low in May.

The study found that 48% of retailers said volumes fell during the first two weeks of the month, against 30% who said they improved.

The balance of minus 18% compared with an improvement of plus 13% in March and April represented the weakest result since the depths of the recession last March.

Poor weather at the start of the month dented clothing sales, but the CBI said the overall performance was disappointing.

Ian McCafferty, the group's chief economic adviser, said: "It appears that shoppers are feeling the pinch again, and are being cautious with their purchases, given the squeeze to real incomes from higher prices and only a modest rise in average pay."

Retailers are also negative about trading next month, with a balance of 15% of respondents indicating that another fall in volumes is expected.

The CBI said the sharpest year-on-year falls in sales volumes came in durable goods and hardware, china and DIY, while clothing sales were also badly hit after three months of continuous growth.

The survey also showed that price inflation continued to rise, with 54% of retailers reporting an increase and 5% saying prices fell.

Economists said shoppers may have been deterred from spending by the heightened political uncertainty over the period, as well as the prospect of higher taxes under a new government.

Jonathan Loynes, chief economist at Capital Economics, said: "It is too soon to be sure that shoppers' resilience is on the wane.

"Still, the fact that both retailers' orders and their expectations for sales next month also dropped sharply might suggest that this is more than a blip."