More rate cuts are needed on top of last week's reduction to 4.5 per cent following the worst July in ten years, top High Street stores warned.
Retail sales fell 1.9 per cent on a like-for-like basis, albeit they rose by two per cent on a total basis, compared with a year ago.
The three-month trend rate of growth rose to 1.7 per cent from 2.4 per cent in June for like-for-like sales, and to 2.3 from 1.1 per cent for total sales. July was much worse than June, hit by cooler weather.
The British Retail Consortium said some good clothing sales on the few warmer days failed to offset difficult trade elsewhere. It said consumers remained cautious and reluctant to commit to large purchases such as furniture, floor coverings and large electricals.
Kevin Hawkins, director general, said: "While the recent cut in interest rates is obviously welcome, it will take several months for there to be any significant effect on consumer spending. More cuts are needed between now and Christmas."
Helen Dickinson, head of retail for accountants KPMG, added: "The sales figures for July will come as a surprise to many. Although they continue the trend seen in recent months of growth in total sales and like for like sales remaining negative, commentators and many retailers alike thought that the impact of events in London coupled with a deteriorating trend throughout the year could have been much worse."