Poor weather and higher interest rates combined to give shop owners their worst sales performance in 18 months, a CBI survey for August revealed today.
The slowdown continued a trend that began in July when retailers said sales of goods such as football kits, beer and televisions suffered in the wake of the Euro 2004 championships.
Analysts said the data showed that household spending was declining sharply in the wake of recent hikes in the cost of borrowing to 4.75 per cent.
CBI director-general Digby Jones described the slowdown as “unexpected”, with sales of groceries falling at their fastest rate since the survey began 21 years ago.
Advertisement
The survey showed that 34 per cent of firms saw sales rise on a year ago, while 32 per cent experienced a slide. The positive balance of 2 per cent compared with 24 per cent in the July survey, and was the lowest since March 2003 when it was minus 13 per cent.
The underlying trend in sales growth - the average over a three-month period - has slipped back to where it was in April from recent peaks in June and July.
Mr Jones said: “If the Bank of England’s strategy of gently slowing consumer spending is working, further rate rises could be put on hold.”
A survey by research firm GfK Martin Hamblin last week showed consumer confidence falling during August, while the Bank of England revealed today that individuals were currently borrowing less than at any time since December.
Gerrard chief economist Simon Rubinsohn said: “Significantly, there is little evidence that retailers are having much success in raising prices.”
Advertisement
Heavy discounting was the likely reason behind strong sales of furniture and carpets for the fifth month in a row, the CBI said.
But clothing sales were affected by the poor weather and were flat compared with solid growth earlier this summer. Retailers cut back on orders to bring stock levels down from last month’s high.
Despite the slowdown, retailers were optimistic that sales will improve in September and the following two months. More firms are planning to increase capital spending in the year ahead than three months ago, the employers’ organisation added.