U.K. retail sales weakened in July to their lowest in more than a year, the Confederation of British Industry said Thursday, adding to evidence that the economy has got off to a slow start in the third quarter.

In its quarterly distributive trades survey, the CBI reported a volume of sales balance of -5 in July compared with -2 in June. That is the weakest reading since June 2010.

The balance is the difference between the percentage of retailers reporting higher sales than a year ago compared with those reporting lower sales.

The data are an early sign that consumer spending will struggle in the third quarter. Britons are facing many pressures, including stagnant wages, elevated unemployment, tight lending conditions, and high inflation.

"There's been a fall in real disposable incomes since the beginning of the year with shoppers either cutting back or trading down to make their declining spending power go further," said Judith McKenna, chief operating officer of Walmart Inc.'s Asda supermarket group and chairwoman of the CBI panel.

"With consumer confidence fragile, U.K. retailers continue to face challenging times," she said.

Adding to the gloom, retailers expect sales to worsen further in August. The expected sales balance for that month fell to -12. Consumers in August will face a further squeeze on their finances following sharp rises in gas and electricity tariffs announced by energy companies, beginning that month.

Howard Archer, U.K. economist at IHS Global Insight, said: "The likelihood is that consumer spending will be muted for some time as household purchasing power remains under severe pressure from high inflation, muted wage growth and the increasing fiscal squeeze"--referring to the government's GBP111 billion austerity program of tax rises and spending cuts.

High prices for food in July caused the first fall in grocers' sales volumes in more than two years, the CBI said.

The latest official reading of retail sales showed a rebound in June following a weak performance in May. But again, high prices caused food stores to suffer their biggest annual fall in sales since records began in 1988.

Data Tuesday showed the economy grew by just 0.2% between April and June. That lack of growth and low consumer spending immediately fuels concerns over growth prospects in the third quarter, Global Insight's Archer said.

Weakness in the retail sector could be a key factor keeping the Bank of England from lifting its key interest rate from an all-time low of 0.5%, despite an above-target inflation rate of 4.2%. The BOE's target rate is 2%.

"Weak consumer spending is likely to be a key factor deterring the Bank of England from raising interest rates until at least mid-2012," Archer said.

The CBI polled 134 firms in the U.K. between June 28 and July 19.