High street retailers reported a greater-than-expected slowdown in sales growth this month, the CBI said, amid poor weather and weak consumer confidence.
A balance of 11% of retailers said sales volumes were higher than a year ago this month, which was a weaker reading than companies had predicted in June.
Businesses also reported higher orders in July, with a balance of 5% reporting growth, but again this was lower than anticipated, the CBI said.
Judith McKenna, chair of the CBI Distributive Trades Panel and Asda's chief operating officer, said: "With consumer confidence weak and wage growth remaining sluggish, the longer term outlook for retailers remains challenging."
The survey results were published as a PricewaterhouseCoopers (PwC) study showed an increase in the number of insolvencies among retailers rising to 426 in the second quarter, up from 386 the previous year.