Retail sales volumes suffered their largest monthly fall since December 2023 last month, according to official figures which suggest a link to rising bills.

The Office for National Statistics (ONS) reported a 2.7% decline in the quantity of goods bought in May compared to the previous month.

The body said its interaction with retailers suggested “inflation and customer cutbacks” accounted for the fall, which was across all categories, but led by food.

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The seasonally adjusted data – which reflects the effects of holidays – means that those for Easter are modified to give a clearer picture of sales trends.

A poll of economists by the Reuters news agency had expected to see a decline in volumes of just 0.5% in May following April’s growth of 1.3%.

May was the month when households would have noticed the hit from the so-called ‘awful April’ above-inflation hikes to essential bills, including council tax, water, mobiles, broadband and energy.

Retail sales growth had proved to be resilient this year until May but April brought a number of additional curveballs to confuse sentiment and place pressure on the economy generally.

Donald Trump’s “liberation day” tariff regime kicked in while Budget measures, including rises to minimum pay levels and employer national insurance contributions (NICs), also placed additional costs on businesses.

Retail is the UK’s largest private sector employer. It had threatened higher prices and hits to hiring and wage growth ahead of the tax take coming into effect.

While the inflation picture for May was largely flat, the ONS reported last week employment data showing a tick up in the unemployment rate to 4.6% in the three months to April.

Figures from the taxman also showed a 109,000 decline in payrolled employment during May.

Further data from the ONS on Friday revealed a £1.8bn jump in additional “compulsory social contributions” – largely made up of NICs – in May.

It took the extra tax take to a record £30.2bn across April and May but borrowing still surged to £17.7bn last month, the second highest figure on record for May, the ONS said, as the chancellor bids to grow the economy within tight fiscal rules.

Consumer spending accounts for around 60% of UK output.

A closely-watched measure of consumer confidence covering June showed no rise in consumers’ expectations for spending on so-called big ticket items.

The GfK survey was taken after the UK’s trade truce with the US but before Israel’s air war with Iran began.

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That has pushed oil and natural gas prices up by double-digit percentage levels in under a week, threatening a new energy-led cost of living threat.

It’s another challenge that retailers, businesses more widely, and Rachel Reeves could do without.

Thomas Pugh, economist at audit firm RSM UK, said: “Looking ahead to the budget in the autumn, the under performance of the economy and higher borrowing costs mean the chancellor may already have lost the £9.9bn of fiscal headroom that she clawed back in March.

“Throw in the tough outlook for many government departments announced in the spending review and U-turns on welfare spending and the chancellor will probably have to announce some top-up tax increases after the summer.”