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Retail sales slow in year to May as households feel the pinch

Retail sales were broadly flat in the year to May following strong growth in April, while selling prices rose at the fastest pace in six years, according to new research.

The Confederation of British Industry's Distributive Trades Survey found 29% of firms saw sales volumes were up on a year ago, while 27% said they were down.

A balance of 6% expect sales volumes to pick up pace a little in June.

Sales volumes for the time of year were considered broadly average, and are expected to remain the same next month.

The volume of orders placed with suppliers fell over the year to May, with 16% reporting a rise and 28% reporting a fall. Firms anticipate a broadly similar fall next month.

Retailers expect their overall business situation to deteriorate over the next three months and investment intentions for the next year compared to the previous 12 months were negative.

Average selling prices rose at the fastest pace since May 2011, with 62% reporting increases.

Year-on-year growth in internet sales volumes slowed markedly in May, dropping from 48% to 31%. Growth is expectedly to accelerate marginally next month (36%), but to remain below the long-run average (52%).

Alpesh Paleja, CBI principal economist, said: "It's clear that households are increasingly feeling the pinch, as rising inflation pushes down on real earnings. Taken together with higher import cost pressures from a weaker pound, this is creating a challenging environment for retailers."

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