Any economic upturn is yet to reach shoppers’ purses according to Morrisons boss Dalton Philips who reported a sales slump at the Bradford-based supermarket over the past six months.

The UK’s fourth biggest grocer delivered a worse-than-expected 1.6 per cent decline in underlying sales in the half year to the start of August, while pre-tax profits fell 22 per cent to £344 million – nearly double the forecast drop of 13 per cent.

It blamed a ‘slow and fragile’ recovery which meant customers’ incomes were shrinking under relentless pressure from stubbornly high inflation.

Customers were increasingly shopping about for bargains, with more than 40 per cent visiting multiple supermarkets on one shopping trip, and they were buying less food as they stuck rigidly to budgets.

Morrisons said it had opened 33 convenience stores and expected to have 100 by the end of its year.

Chief executive Dalton Philips said like-for-like sales were steadily improving after falling 1.8 per cent in the three months to May 5, and he expects another sales improvement in the second half as its turnaround bears fruit.

Morrisons said it is on track to start selling food online through a tie-up with internet grocer Ocado by the end of January.

It said 169 stores have been overhauled with its Fresh Format, which emphasises the quality of its food and shows off its butchers, bakers and fishmongers.

Mr Philips said: “Whilst there are early signs that the UK economy has started to turn a corner, the grocery market continues to be a very challenging environment in which to operate.

“Consumers are continuing to react to these pressures by becoming more discerning, and seeking to get better value for money by both shopping across multiple channels and using innovative approaches to the way they shop.

“Our strategic initiatives are laying the foundations for good progress in the year to January, 2015, and beyond.” Morrisons also joined rivals in signalling an end to rapid expansion of new space.

It will slash its space growth to around half the rate over the past five years, at 350,000 square feet annually.

It expects sales growth mainly to be driven by online and convenience store operations, both of which use less capital than opening big new stores.

Turnover was level at £8.9 billion, but net debt surged to £2.5 billion from £1.7 billion a year earlier as it invested heavily.

Chairman Sir Ian Gibson said: “Our financial position is strong and we remain focused on maximising returns from our assets and delivering superior shareholder returns.

“Once again our interim dividend is increased by ten per cent, in line with our previous commitment.”