Retail sales fall less than expected

Retail sales fell less sharply than expected in May and are forecast to rise next month even as retailers ramped up prices at their sharpest rate since 1992, according to a survey.

The Confederation of British Industry said its distributive trade survey's reported sales balance rose to -14 this month from -26 last month. Analysts polled by Reuters had forecast a reading of -20, while retailers themselves had expected -15.

Retailers expect a sales balance of +6 next month but policymakers are likely to be dismayed by further signs of rising price pressures when inflation is already running a point above the central bank's two per cent target.

The quarterly reported price balance rose to +56 this month from +50 in February. That was the highest since May 1992 while the quarterly price expectations balance rose to +52 from +48 in February, the highest rate since August 1992.

"The high street is facing another testing month as consumer spending power has been hit by the rising cost of fuel and food as well as any credit crunch worries," said Ian McCafferty, economic adviser to the CBI.

"It is encouraging that retailers can see some recovery in sales next month but they are not optimistic about the business outlook and retail conditions are likely to remain tough." Much warmer than usual weather appeared to have boosted sales of food and clothes.

The CBI said grocers, including major supermarkets, had a strong month with a balance of +51 reporting year-on-year growth while clothing sales stabilised following a poor April.

However, shops selling big-ticket items linked to the housing market had another difficult month. Business in the furniture and carpet sector was particularly weak with balance of -84, the lowest since September 2005.