UK shoppers are beginning to show signs of feeling the economic pinch.

Leading supermarket chain Asda, returned a second successive quarter of declining profits on underlying sales, prompting fears that this could be the start of a wider trend, as taxes and fuel costs rise. This comes on the back of the emergency budget, and ahead of the VAT increase at the end of the year.

The Walmart-owned UK supermarket said that sales fell by 0.4 per cent in the quarter ending July 31. This followed a previous quarter drop of 0.3 per cent in the first quarter, the first time Asda fell in underlying sales in the past five years.

Chief executive Andy Clarke took some of the responsibility for the returns, saying the group was not fully focused on their customers, which would hopefully change. The lack of attention to the consumer resulted from Asda dealing with its own budgetary constraints according to Clarke, who added that the supermarket was sticking to its everyday low price philosophy that emphasises fewer promotions and better quality products.

Asda removed one third of its multi-buy offers in the past three months, with staple groceries such as milk, eggs, sugar and bananas all returning lower prices in the past few weeks. Asda trailed its supermarket rivals when it came to sales growth, reporting a 2.9 per cent increase in the three months ending August 12. Morrisons was at 6.9 per cent, with Sainsbury’s improving by 5.9 per cent and Tesco 3.9 per cent.

High street shops have again suffered a slump in sales.

For the second consecutive month, retailers such as Marks & Spencer, H&M, Gap, Thomas Cook, Tesco and Sainsbury’s combined to record an additional downturn.

To compound matters, economists have warned Chancellor George Osborne’s tough budget will result in further cuts to consumer spending.

In the latest monthly retail survey from market analyst CBI, figures fell by five per cent in June, well short analyst’s forecasts of positive 5 per cent growth. June spending continued the trend seen in May, where a surprisingly weak rate of -18% per cent was experienced. CBI did suggest that the World Cup would offer retailers a limited respite, as will the predicted spending rush on before the VAT hike in January, but that overall the retail growth outlook remains tepid.

The survey, polled respondents from May 29 to June 10, the beginning of the World Cup, revealed that the largest spending downturn in June was in leather goods and footwear, with hardware and DIY supplies also suffering. The areas that did show increased spending were around the football tournament in South Africa, with food, drinks and television sales all up.

Despite the poor results and gloomy forecast, retailers remain optimistic that a rebound will be seen in July, and many are relying on higher consumer spending in the second half of the year before the VAT is raised from 17.5 per cent up to 20 per cent in January. The British Retail Consortium, however, has warned that the rise will cause job losses and a rise in inflation.