Figures indicate consumer slowdown

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The Independent Online
Evidence emerged yesterday of a slowdown in consumer demand last month as high street sales and purchases of new cars failed to live up to expectations.

The Confederation of British Industry said the annual growth in retail sales in May was the lowest since October 1995. Only half those retailers that had been expecting an increase in sales actually reported one.

Meanwhile, the Society of Motor Manufacturers and Traders reported an increase in new car sales last month of just 2.5 per cent compared with an overall rise of 5 per cent for the first five months of the year.

This evidence of a consumer slowdown may leave the Bank of England's monetary policy committee with a finely balanced decision on whether or not to raise interest rates. The committee concludes its first meeting at lunchtime today.

The Bank's Governor, Eddie George, spoke earlier this week of his concern at the money flooding into the economy from the pounds 30bn building society windfalls. The comment was taken as an indication in the markets that he was in favour of an increase in interest rates.

The consensus among City economists remains that the seven-strong committee will vote to raise base rates by a quarter point to 6.5 per cent. Alternately they may wait to see the contents of the Chancellor, Gordon Brown's first Budget on 2 July.

According to the CBI's latest distributive trades survey, 46 per cent of retailers reported an increase in sales in May while 25 per cent reported a decline. The balance of 21 per cent compares with 42 per cent who have been expecting an improvement.

Alastair Eperon, chairman of the CBI's distributive trades panel, said: "The slowdown in sales growth reported in May is disappointing for retailers." However, he said that the slight easing in annual price increases also detected in the survey was good news for inflation.

Car sales reached 169,886 in May compared with 165,685 in the same month last year. Imports made up 63.5 per cent of total sales.

Roger King of the SMMT said the modest sales growth showed that the market remained tough.

Ford was the market leader with a 20 per cent share of sales, while Vauxhall was second with 13 per cent.

Rover remained in third place as its market share slipped to below 10 per cent.