Slowdown in retail sales as household budgets hit

Retail sales volumes increased month-on-month by 0.2 per cent in July, compared to a revised 0.8 per cent boost in June, the Office for National Statistics (ONS) said. Economists had expected a 0.4 per cent rise.

Household good stores, clothing and footwear shops, and non-store retailing, which includes internet and mail order sales, all suffered as cash-strapped consumers reined in their spending.

The retail sector has suffered at the hands of a squeeze on household budgets – driven by muted wage growth and high inflation, which was 4.4 per cent in July, up from 4.2 per cent the previous month.

Retailers have had a torrid year with the likes of fashion chain Jane Norman, interior designer Habitat and wine merchant Oddbins falling into administration, while Mothercare, entertainment group HMV and chocolatier Thorntons have all announced store closures.

The ONS said there was evidence that retailers had brought in their summer sales earlier than usual, in May or June, to entice frugal shoppers. But there was not enough evidence to suggest chains had dragged the sales season on in July as volumes suffered, the ONS added.

Clothing and footwear stores posted a 0.3 per cent drop in sales volumes between June and July, while household goods stores also saw a 0.3 per cent decrease.

Household goods stores, such as Comet, have been among the worst-hit retailers during the spending squeeze as consumers forgo purchases of big-ticket items such as fridges, TVs and cookers.

Non-store retailing, which includes internet, mail order and market stall sales, saw sales volumes drop 0.9 per cent month-on-month.

The sub-sector has seen strong growth over the year – with volumes up 16.9 per cent compared to July 2010 – and the ONS put the drop-off in volumes down to a particularly strong performance in June.