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Retail sales growth weak

Analysts had expected stronger figures after retailers slashed prices aggressively in summer sales

Retail sales in Britain eked out meagre growth last month, as cash-strapped consumers cut back spending despite summer sale discounts.

Economists said the weakness of consumer spending, which accounts for two-thirds of the economy (with 40% of that from retail sales), highlights how close the UK is to sliding back into recession.

The Office for National Statistics said sales volumes grew by 0.2% in July from the previous month, leaving sales unchanged from last year’s level. The City had expected 0.3% monthly and annual gains, as retailers slashed prices aggressively in the summer sales.

In the three months to July, retail sales edged 0.1% higher. British consumers are embarking on a new round of belt-tightening as soaring food and petrol prices and below-inflation wage rises eat into household budgets.

Chris Williamson, chief economist at Markit, said: “Such weak spending is no real surprise. People are worried about job security, and incomes are being squeezed by higher prices. After inflation, real take-home pay is falling by over 2% per annum. Concerns about the economic outlook are also causing shoppers to hold back on making big-ticket purchases.”

While food and fuel sales were up 0.7% and 0.4% respectively, clothes and shoe sales, along with household goods suffered 0.3% declines. Mail order and online sales fell 0.9% and department stores recorded zero growth.

Colin Ellis, chief economist at the British Private Equity and Venture Capital Association, said: “With the economy still showing little sign of swift rebalancing towards net exports and investment, support from the household sector remains crucial. Households are still keeping a close eye on their spending, and with large rises in gas and electricity prices looming, consumer caution could be set to intensify in the months ahead.”

Nick Beecroft, senior markets consultant at Saxo Bank, was even gloomier. “If anything, the data just serves to confirm the general picture of an economy which can be described as, at best, moribund, but may well look like it’s falling off a cliff by the time we see August’s figures.”

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