The latest CBI Distributive Trades Survey also found the retailers were the most negative they have been about the general business situation since February 2009.
31 per cent of retailers saw the volume of sales rise in the two weeks to 16 August, while 46% said they fell.
A balance of -11 per cent of retailers said they felt more negative about the business situation over the next three months than they did three months ago.
Price inflation remains above average at +55 per cent, but is the lowest balance since November 2010 (+45 per cent). The continued rise in average prices isn’t expected to slow much in the coming month, however.
Sales growth for the time of year was not quite as bad as retailers expected, however, the volume of orders placed with suppliers fell (-22 per cent) at the fastest pace since May 2010 (-24 per cent). Orders are expected to fall again next month.
Looking ahead, retailers expect the volume of sales to fall again in the year to September, but at a slightly slower pace, with 27 per cent expecting a rise and 35 per cent predicting a fall.
Retailers are scaling back investment plans over the next 12 months, with a balance of -11 per cent being the most negative since February 2009.
Judith McKenna, chair of the CBI Distributive Trades Panel and Asda COO, said: “As expected, August was a tough month on the high street. Sales volumes fell at a pace not seen in over a year, as consumers have continued to see their real incomes squeezed by a combination of inflation and weak wage growth.
“This survey suggests that prices will rise more slowly in the coming months, and savvy retailers will continue to offer consumers the lowest prices possible, but with energy and commodity costs still high, families’ spending power looks like being constrained for some time.”
Employment in the retail sector was down slightly for the period (-7 per cent) on a year ago, although expectations for the next three months (-1 per cent) are the least negative since February 2004.