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Retail sales show September fall

• Balance of -15% of retailers saw sales fall
• Figures add to pressure on George Osborne
• Analysts warn of tough Christmas for shops

Retail sales dipped in September with furniture and department stores the worst affected, according to a survey by the CBI.

The fall was the sharpest since May and is expected to ramp up the pressure on chancellor George Osborne to introduce measures in his autumn statement to boost growth and prevent a double-dip recession.

Osborne is expected to stick with his current tax and spending plans when he tells MPs in November how the government must react to the weakening UK and global outlook.

According to the CBI’s distributive trades survey, 24% of retailers saw sales volumes rise year-on-year, while 39% reported a fall, giving a balance of -15%.

More worryingly, the three-month average of sales, which smoothes out volatility in the monthly figures, declined at the fastest rate since August 2009.

Analysts said weak consumption could drag the economy down further and signal a contraction in output in the third and fourth quarters.

They warned retailers to prepare for a difficult Christmas.

Chris Williamson, chief economist at financial data provider Markit, said: “The findings add to a growing body of evidence which suggests that retailers will enter the all-important final quarter of the year fighting for business in the face of weak consumer confidence. Household spending is being subdued by job worries, rising prices, higher utility bills and weak pay growth.”

He added: “Intense competition on the high street is likely to help bring down inflationary pressures, but will also act as a drag on economic growth. With business activity already looking lacklustre as we move into the fourth quarter, an accompanied downturn in high street sales adds to the risk of the economy contracting.”

Samuel Tombs, UK economist at Capital Economics, said conditions on the high street remained tough for retailers. “The survey revealed that retailers expect the stagnation to continue – the expected sales balance fell from -7 to -14. But with inflation set to rise further, house prices falling and the economy now starting to shed jobs again, even that expectation may prove to be too optimistic in the months ahead.”

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