The latest round of data has shown that the U.K. retail sector has started to slump as consumers cut back on spending, which also sent home prices to their lowest level in more than a year-and-a-half, according to The Daily Telegraph. On Tuesday, the British Retail Consortium reported that same-store sales at retailers in the U.K. dropped by 2.1% year-over-year. The drop was led by steep declines in food and furniture sales, and BRC director general Stephen Robertson said, Customers fundamental reluctance to spend is now clear to see. He continued, Households' disposable incomes continue to be squeezed by uncomfortably high inflation and low wage growth, while uncertainty over the effects of government cuts is hitting sentiment about future finances."
A separate report from Halifax showed that the average price of a home in the U.K. inched 0.1% higher in May from the previous month to £160,519. However, the change brought the annual change in home prices from May of 2010 to a 4.2% decline, which is the largest drop since October 2009. The limited monthly gain represents an improvement from a 1.4% month-over-month decline in April, but fell short of economists forecast for a 0.2% increase. Howard Archer of IHS Global Insight said the data reinforces our view that further weakness lies ahead in the face of ongoing muted housing activity and difficult economic fundamentals.