Concerns that the drop in real wages in the UK are putting the squeeze on consumer spending were realised on Thursday after data showed retail sales dropped much more sharply than forecast in May.
Headline retail sales fell 1.2% month on month after rising 2.5% in April. Analysts forecast a 0.8% fall. Excluding fuel, sales fell 1.6%.
This left headline annual retail sales growth at 0.9%, down from 4.2% in April and missing estimates of 1.7% growth. Without fuel sales the annual growth was just 0.6%, down from 4.6%.
The figures underlined concerns that the squeeze on consumers from rising inflation and slowing wage growth is stifling the UK's spending power.
Earlier this week data showed that consumer prices rose at an annual 2.9% in May while the rise in average annual earnings dipped to 2.1% in April.
"This week’s inflation and labour market figures showed that the squeeze on real earnings growth is intensifying," said Scott Bowman, UK economist at Capital Economics.
He added: "The impact of the fall in the pound on prices is weighing heavily on spending volumes growth."
First quarter gross domestic product growth of 0.2% significantly undershot market forecasts and while surveys published during the first few weeks of the second quarter indicated improving conditions, the data have begun to soften as the quarter progresses.
"This looks like it’s going to be a tough year as a whole for households - the economy will inevitably suffer as a consequence," said Chris Williamson, chief business economist at IHS Markit.
The emerging pressures on economic growth looked likely to prevent the Bank of England making any move on monetary policy in the coming months.
At Thursday's rate announcement, the Bank's monetary policy committee was expected to keep rates and QE purchases on hold.
The pound was weaker on Thursday, falling 0.4% to $1.2704 against the dollar.
Stock indices were lower, with retailers and other consumer facing companies losing the most.
The FTSE 100 fell 0.7% to 7,426, with Next, the fashion retailer, down 4.8% and Marks & Spencer 3.3% weaker.
The FTSE 250 shed 1.2%, with white goods retailer AO World down 4% and a 7% fall for Restaurant Group.