Crisis fear as sales slump

A brutal spending clampdown hammered the High Street last month as the biggest slump in sales for more than a year fuelled fears of a consumer crisis today.

May's shock 1.4% slide in sales volumes raised more concerns over the economy as inflation streaks ahead of wages and a host of retailing big guns warn over the toughest trading climate for years.

Bank of England Governor Mervyn King also warned over "seven lean years" in his Mansion House speech yesterday.

The City was braced for falling sales after April's record weather and the extra bank holiday for the Royal Wedding but the scale of the slump, more than twice as fast as expected and the worst since January 2010, caught economists off-guard.

The decline, with fashion retailer New Look one of the worst hit, more than reversed April's rise as shoppers squeezed by record petrol prices retrenched.

Daiwa Capital Markets Europe economist Hetal Mehta said the fall was "shocking".

She warned: "This confirms our worst fears that the consumer sector is on a steep downward trend."