Tough times have returned to the high street after the Christmas spending splurge, prompting a new call for a cut in interest rates.
Shop and store sales during January rose only 0.2 per cent on a like-for-like basis from a year ago, the British Retail Consortium reported yesterday.
This January was the weakest start to the year since the survey began in 1995.
The three-month trend rate of growth improved to 1.1 per cent from 0.2 per cent in December for like-for-like sales, but slowed to 3.6 per cent from 4.1 per cent for total sales. Figures fell back significantly after the clearance sales ended.
Food sales slowed after their Christmas upturn, and clothing and footwear also dropped back. Home and leisure remained difficult.
Underlying trade is tough as shoppers remain cautious. Although keen to take advantage of clearance promotions and discounts, they were still reluctant to commit to larger purchases.
Kevin Hawkins, BRC director general, said: "After the pre-Christmas upturn, we are now back to the reality of a tough, discount driven retail market.
"The message from every sector of our industry is the same. The squeeze on consumer spending continues unabated. The economy badly needs a cut in interest rates."
The Bank of England Monetary Policy Committee announces its latest monthly decision on Thursday, with most pundits expecting no change.
Helen Dickinson, head of retail at survey backers KPMG, said: "Although Christmas trading was stronger than many had predicted, January sales marked a return to a similar trend to that seen during the rest of 2005.
"Most retailers approached the Christmas results announcements with a high degree of caution on the outlook for the rest of the year and this appears to have been well founded if the last month is anything to go by."
However she noted: "Overall, like-for-like figures remained positive which will be a relief to many."
Tim Sleep, director of retail at accountants Ernst & Young, said: "Better stock management at Christmas resulted in a shorter January sales period and consequently impacted the month's results. However, the bottom line is that consumers now expect big discounts - they are no longer willing to pay full price for many goods.
"The UK retail sector is in danger of going down the US route where there is constant downward pressure on prices."
