Retail figures in biggest fall since 1986 as credit crunch hits the high street

High street sales suffered a record one month fall in June as the credit crunch kept shoppers away.

The volume of items going through the tills fell by a shock 3.9 per cent compared to May, the biggest fall since records began in 1986.

The drop in June came after a surprise
3.6 per cent increase in May, which is now seen as a one-off triggered by a warm spell boosting spending on summer goods.

Analysts seized on the findings as evidence that consumers, hit by spiralling food, fuel, energy and mortgage bills, are tightening their belts.

Even supermarkets, which have been largely immune from the consumer slowdown, are seeing fewer shoppers through the doors.

The fall in sales will explain why the High Street is currently festooned with sale signs offering up to 75 per cent off as the leading chains bid to shift unsold summer stock.

But rthe news will heighten fears that the economy is being tipped into a recession by a squeeze on household budgets coupled with a property market slump.

Matthew Sharratt, an economist at Bank of America said: 'Official data on retail spending now better reflects the reality of a sharply moderating economy in our view.'

He said many retailers are apparently continuing to put up prices, fuelling inflation, despite falling sales.

However, he warned: 'A stalling economy and rising inflation is a potentially toxic combination.'

Vicky Redwood, an economist at researchers Capital Economics, said: 'June's data finally showed the official data moving into line with the gloomy anecdotal evidence.

'What's more, we think that spending growth will weaken considerably further, as house prices keep falling and inflation and unemployment rise further.'

Analyst Allan Monk, of JP Morgan, said: 'Most will see the data as confirmation that the consumer is downshifting, and we would agree that June's release likely marks the beginning of the phase of sustained weakness in the retail sales numbers.'

Clothing and footwear shops were the worst hit in June, with sales down 6.9 per cent compared to May.

Food sales also fell 3.6 per cent, which is the biggest drop since records began in 1986.

Sales volumes at household goods stores, including furniture and electrical goods sellers, fell 5 per cent, the biggest slump since April 1991 when Britain was in the grip of the last recession.

Retail giant Marks and Spencer has been one notable victim of slower spending, warning earlier this month that like-for-like sales fell 5.3per cent during the quarter to June 28.

The claims of chairman Sir Stuart Rose that the store's problems were indicative of a wider High Street slowdown appear to have been born out by the figures from the Office of National Statistics (ONS).

The fall in June came after an increase in sales volumes in May associated with a warm spell and resulting surge in purchases of summer clothing and barbecue food and drink.

The British Retail Consortium said the official figures show 'conditions remain tough for customers and retailers'.

Director general, Stephen Robertson, said: 'The sharp monthly fall in sales volumes confirms May's, unexpectedly high, sales growth was a one-off triggered by summer sun finally arriving.

'The scale of the month-on-month fall in sales volumes is partly because it's a comparison with May's high growth but does show there are few signs yet of tough conditions improving.

'The economic fundamentals remain weak with consumer confidence at all time lows and the housing market on a downward trend.

'But retailers are not taking this lying down. Competition is benefiting customers as retailers fight back with high-profile price cuts and promotions.'