The deterioration in the UK economy is intensifying. According to the Confederation of British Industry, retail sales dropped to the lowest level in 25 years last month as higher gasoline prices, job losses and falling house prices prompted Britons to cut their discretionary spending. As a big contributor to GDP, the latest survey of the retail sector points to the potential of a sharp deterioration or negative GDP growth in the coming quarters. Consumer credit, mortgage approvals and net lending on dwellings have also fallen, reflecting the tough conditions in the UK housing market. Yesterday, Hometrack announced that house prices dropped by the most in 7 years last month. The GfK consumer confidence survey is due for release tomorrow evening. The drop in retail sales suggests that consumer spending will take a big hit as well, dragging the British pound lower.