The motor industry was faced with further grim news yesterday after industry figures revealed a sharp dip in June sales, with further deterioration expected over the next two months.
Strong comparatives from last year's Euro 2004 football championships contributed to the worst annual fall in the monthly Distributive Trades Survey. But the CBI said there was no doubt the underlying picture was bad.
Retailers were also suffering, with what was the biggest fall in monthly sales in the 22-year history of the survey.
Some 42 per cent of retailers questioned said their sales volumes were down over the year to June, compared with 23 per cent saying they were up - the balance of minus 19 per cent was the lowest since the survey began in 1983. The CBI said many stores had brought forward summer sales in a bid to lure in shoppers.
Almost two-thirds of motor traders - 63 per cent - said that their sales were also down over the year to June, compared to just 18 per cent who experience an increase.
The survey suggests that expectations for the month ahead the weakest for almost five years. However, a spokesman for the Retail Motor Industry Federation said the results were more of a reflection of the industry's impressive performance in 2003 and 2004.
The survey reinforced the message of official figures released earlier this month, which showed annual growth in sales volumes hit its weakest level for six years. HSBC economist John Butler called the figures " absolutely shocking" and pointing to a recession.
He said: "If the CBI weakness even partially comes through the official data then the Bank of England will cut interest rates very soon."
But the Bank would have to weigh up the retail sales data with its own figures showing a continued appetite of households for debt, particularly on credit cards. Meanwhile, businesses were hit further as UK diesel prices rose above 90 pence a litre for the first time.
The average diesel pump price in British forecourts reached 90.8 pence a litre last Friday, well above the 90 pence record set April 15, said an analyst at UK-based Oil Price Assessments Limited (OPAL).
Petrol also reached a new high, at 86.8 pence a litre, as crude futures prices on Monday registered fresh records of nearly $61 a barrel in the US and $60 in London.
Taxes take up 70 per cent of the UK retail price for petrol and 67 per cent for diesel.
The Government is under pressure to extend a current freeze on fuel duty up for review this September.