Analysts were expecting May's unexpected surge in retail sales to be reversed in June, but not to this extent. A near 4 per cent fall in the volume of sales in one month is unprecedented - it is the fastest pace of decline since the Office for National Statistics first started compiling the figures.

The ONS came under fire for the May figures, with some suggesting that the data which showed a 3.6 per cent monthly rise, which contradicted the trends being shown by other surveys, such as that conducted by the British Retail Consortium, was flawed. But the ONS stands by its figures, saying that May's surge was caused by good weather. Indeed it has revised May's growth rate by only a fraction of a percentage point.

But regardless of the debate over the monthly figures, the three monthly figures underline the trend of slower growth in sales. Sales in the three months to June grew by just 0.6 per cent, down from 1.7 per cent in the previous quarter. Sales at food stores in the three months to June were 0.2 per cent lower than the first quarter of the year, suggesting that soaring food prices are prompting shoppers to curtail their spending.

In addition, and most worryingly for the Bank of England, the inflation pressure is picking up, with the retail sales deflator - an indicator of inflation for high street items - rising sharply to its highest level since May 2007.

Explore Economics

• Pre-Budget Report 2008

• Budget 2008

• World Economic Forum

• The Times MPC

Times Recommends

• Calls grow for steep rate cut as services deteriorate
• Stagecoach shares fall 20% on rail warning
• UK broadcasters web TV 'limits competition'