Retail sales weaken at fastest pace in 16 months

Shoppers walk past a shop window display in Birmingham, central England July 26, 2011.

LONDON (Reuters) - Retail sales weakened at their fastest pace in 16 months in September and stores expect little improvement in October as squeezed consumers clamp down on spending, a survey by the Confederation of British Industry showed on Tuesday.

The CBI distributive trades survey's retail sales balance edged down to -15 in September from -14 in August. That was the lowest since May 2010, but in line with analysts' forecasts.

The CBI blamed the dip on a combination of low wage growth, high prices and rising unemployment, but said sales appeared to be stabilising.

"Shoppers are still clamping down on discretionary spending and focused on buying the basics at the best price," said Judith McKenna, chairwoman of the CBI Distributive Trades Panel.

And retailers see little chance of a pick-up in October, with the expected sales balance for October falling to -14 from -7 in September, the lowest reading since June 2010.

"With the consumer squeeze set to get tighter with the winter utility bills rise, we expect retailers will face a challenging October," McKenna said.

Britons are suffering the biggest squeeze on incomes in 30 years, and a forbidding economic outlook has made people even more reluctant to splash out.

In another sign of the pressures on consumers, British video games retailer Game Group (GMG.L) posted much wider first-half losses than in the same period last year and predicted that trading conditions will remain tough for the rest of the year. (Reporting by Olesya Dmitracova)