HIGH street tills failed to ring up any rise in sales last month as battered retailers were hit by a slump in trading at food stores.

Retail sales volumes stagnated in August, while a decline in sales in July was revised to show a drop of 0.6 per cent — twice as large as previously reported.

The much worse than expected official figures cut annual sales growth to just 0.8 per cent, matching May for the lowest such increase since January 1996 and rekindling City speculation over further cuts in interest rates.

The retail industry’s gloom over the latest dose of bad news was reinforced as Next, the fashion chain, reported its worst fall in underlying sales for seven years. Kingfisher, the DIY group, also said that underlying UK sales had dropped by 6.4 per cent in the first half.

As both sounded warnings of worse to come, general retail shares fell sharply, dropping 2 per cent. Simon Wolfson, chief executive of Next, said that the retail climate was the toughest he had seen in 15 years at the company.

An unusually dismal August for supermarkets and other stores mainly selling food was a key factor behind the lacklustre official sales data for last month. Sales volumes at food stores tumbled by 1.2 per cent, cutting their annual sales growth to 0.8 per cent, the weakest since April 1999.

Economists were startled by the size of the August drop in food store sales, but doubts over the data were dispelled as even unadjusted figures for the value of takings in the sector showed a 3.2 per cent fall.

Non-food sales were stronger, however, with volumes up by 0.8 per cent last month. The exact state of high street conditions was further clouded by more buoyant three-monthly figures. In the three months to August, total sales rose 0.8 per cent in the best performance since last November.

But economists said that the three-monthly comparisons were flattered by June’s short-lived 1.2 per cent sales surge and most saw little sign of the consumer revival predicted by the Bank of England. Philip Shaw of Investec said: “Today’s figures are a stark reminder that the high street boom is over and that the next move in interest rates is likely to be down.”

Mr Wolfson said that he expected trading to continue to worsen: “The first half has been difficult and the second half I think may be tougher.” He did not expect any improvement until January at the earliest.

His comments came as Next reported a 6 per cent decline in underlying sales in the six weeks to September 10. With the City pinning some blame for August’s performance on the impact of soaring fuel prices, Mr Wolfson said some decline in these would be important to any recovery.

Gerry Murphy, chief executive of Kingfisher, said: “We think the market has softened into the third quarter. It is getting tougher.”

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