Retail sales fell again in the year to May, following a brief pause in April, the CBI said.

This month’s decline in sales was in line with retailers’ expectations and, other than in April, was the least negative result in nearly a year.

At the same time, retailers’ sentiment about general business prospects was the least negative for over a year.

In the latest CBI Distributive Trades Survey, 31% of retailers said year-on-year sales volumes were up in the first half of May, while 48% said they were down.

The resulting balance of -17% was close to retailers’ expectations (-15%) and, other than last month’s broadly flat figure of +3%, was the least negative figure since June 2008 (-9%). A similar decline in sales is expected in June (-20%).

Among the retail sectors, two reported positive sales growth in May - grocers and footwear & leather – although sales grew for both at a slower pace than in April. The hardware, china & DIY sector saw flat sales growth in May, while sales of big ticket household items, such as durable goods and furniture & carpets, continued to fall.

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Chief Operating Officer of Asda, said:

“Conditions were tough again in May for retailers, proving April’s better sales figure was a temporary blip. Trading conditions are expected to remain difficult in June.

“As for much of this year, supermarkets and shoe shops were the ones seeing decent growth. Sectors more dependent on people’s house moves, such as furniture and carpets and durable household goods continued to see falling sales.

“The harsh reality is consumers need good reason to part with their hard-earned cash. Demonstrating you offer value for money as a retailer has never been more important, and marks out the true survivors.”

Sales for the time of year were reported to be poor by a net 36% of retailers, though they have slightly less negative expectations for June (-20%). The three-month moving average of sales volumes, which smooths out monthly peaks and troughs, remained weak (a balance of -19%) but was the least negative figure for nearly a year (-16% in June 2008).

A balance of 24% reported a year-on-year fall in orders placed upon suppliers and, other than in April (-11%), this is the least negative since June 2008. The balance of +8% of firms saying stocks were more than adequate to meet demand is the lowest since June 2007 (+6%).

Retailers reported that prices rose in the year to May at the slowest rate for nearly three years, with this quarter’s balance (+12%) the lowest since August 2006 (+12%). A similar rate of price inflation is expected in August (+15%).

When asked about the general business situation facing retail, the balance of firms expecting it to deteriorate (-8%) was the least negative since November 2007 (a balance of -1%).

Ian McCafferty, the CBI’s Chief Economic Adviser, said: “Businesses of all types are looking to reduce stock levels during the recession, to adjust to lower demand and to improve cashflow. Retailers’ efforts appear to be having an impact, with stock levels lower relative to expected demand, which should help improve conditions along the supply chain.

“Retailers are less pessimistic about their general business situation, and the decline in demand now appears to be slowing compared with the turn of the year. However, with unemployment still rising, conditions will remain tough.”