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Consumer caution and higher inflation slows retail sales

Figures released today by the Office for National Statistics showed that retail sales fell 1.4% in May. The ONS said the figures were worse than analysts had expected.

GENERAL MERCHANDISE

Consumer caution and higher inflation slows retail sales

Figures released today by the Office for National Statistics showed that retail sales fell 1.4% in May. The ONS said the figures were worse than analysts had expected.

The decrease follows strong growth in April as a result of the extra bank holiday, royal wedding and warm weather.

Food stores sales volumes decreased with a drop of 3.5% compared to May 2010. Within predominantly non-food stores, there was volume growth across all sectors apart from household goods stores which fell for a fourth consecutive month to 6%. Non-store retailing again saw the largest volume growth between May 2010 and May 2011 with an increase of 19%.

Commenting on the figures British Retail Consortium economist, Richard Lim, said: "After the feelgood boost of April, which saw retailers benefiting from sunny weather and bank holidays, May was a return to reality. Consumers are overwhelmingly cautious about their personal finances and are reluctant to spend, particularly on big ticket items. Uncomfortably high levels of inflation and low wage growth continue to squeeze households' disposable income while job security remains a key concern.

"While demand remains weak, retailers are also being hit by surging commodity prices, property and employment costs. Sales are being driven by promotions and special offers at the cost of profit margins. Consumers are postponing the purchase of non-essential items.

"A return to sunny weather through the summer may provide another lift to retail sales, but it will take more than the holiday season to fix the underlying problem of low consumer confidence."

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