Retail sales slump to lowest level in 16 months Retail sales shrank at their fastest rate last month since the end of the recession, as consumers tightened their belts in the face of falling levels of disposable income.
The scale of the contraction took economists by surprise and sparked a sterling sell-off as traders reacted to fresh evidence of the UK economy's weakness. Retail sales were expected to decline by 0.6pc in May but in fact contracted by 1.4pc, according to the Office for National Statistics (ONS). The slide was the steepest since January 2010, just three months after the UK came out of recession. Ed Balls, the shadow Chancellor, seized on the data to support his call for a temporary cut in VAT. "By putting more money directly into people's pockets, it would be a boost for consumers," he said. "The inevitable increase in consumer confidence would help the struggling retail sector." Economists warned the squeeze on households will weigh on the recovery, as consumer spending accounts for about two-thirds of GDP. In London the pound fell by 1.34 cents to $1.6122. "The underlying trend in sales over the past several months still looks broadly flat at best," said Vicky Redwood at Capital Economics. "What's more, we expect this trend to worsen as households respond to the intensifying squeeze on their real pay. We continue to think that overall household spending will drop by about 1pc this year." http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8580510/Retail-sales-slump-to-lowest-level-in-16-months.html