More than two thirds of retailers suffered a fall in sales volumes in the first half of December and fears are mounting about New Year prospects.
Only 13 per cent of stores reported sales volumes up year-on-year in the period and 67 per cent said they were down, the CBI's Distributive Trades Survey revealed.
The resulting balance of -55 per cent is worse than the -40 per cent that had been expected and the worst figure since the survey began in 1983.
A balance of 49 per cent expect sales to be down year-on-year in January.
Asda retail director and chairman of the CBI Distributive Trades Panel Andy Clarke said: "This week will be nail-bitingly tense for retailers as they pin their hopes on a last-minute Christmas dash.
"We have already seen many stores bringing forward their Sales and discounting deeply. But with shoppers continuing to watch their pennies it seems many are holding off doing their Christmas shopping in the hope of bagging a bargain."
He added: "It is too early to say whether the recent cuts in interest rates and VAT will help lift consumer spending. Retailers are bracing themselves for a particularly challenging festive season with little prospect of good cheer in 2009."
All retail sectors reported falls in sales volumes for early December. Household goods stores suffered most, followed by furniture and carpets. Grocers also suffered a sales decline for the second month in a row and footwear and leather goods retailers' growth in the last two months was terminated.
