Retail sales fell for the third consecutive month in the year to May, according to new figures released today.
The Confederation of British Industry (CBI) found that 41% of retailers across the UK reported decreases in sales volumes in the year to May, while 33% said they were up, accounting for a negative balance of 7% after rounding the figures.
The drop was sharper than was expected but slightly less than was recorded in April and March.
The current negative headline balance reflects tightened consumer spending and drives up expectations for another decline in June, with the expectations balance bottoming out at its lowest level in 13 years.
Analysts suggest this drop in expectations and the fact that the reported balances have been negative for four of the past five months signal that current conditions may persist for some time.
"Today's data provides us with further evidence to suggest that the softening in the retail sector is both genuine and entrenched," said George Buckley, UK economist at Deutsche Bank.
"The cyclical slowdown in consumption growth makes it difficult to generate decent growth during the remainder of the year and serves to highlight our view of sub-trend growth and the need for the Bank of England to cut interest rates in H2," he added.
The report suggests fear of higher interest rates, pension uncertainties, expectations of tax increases, a benign upsurge in earnings growth and rising inflation are to blame for the weakening consumer spending.
"There is however considerable variation across the sector, with some retailers doing much better than others, the performance varying by category within the sector," said John Longworth, executive director of ASDA and chairman of the CBI's DTS Panel.
"Sales of groceries, books and stationery are up on a year ago, but those of big ticket items, furniture, carpets, DIY goods and clothing are down," he added. "Broadly speaking, the categories of goods most closely correlated with housing transactions have fared worse than the average over the past year."
The survey also recorded year-on-year drops in employment, marking the longest sequence of falling retail staff numbers since 1995.
Another negative balance of 25% of retailers stated they expected to authorise less capital investment than a year ago, the highest negative balance since August 1991.