Retail sales in the US barely rose last month, raising fresh concern over the strength of the US recovery after an anaemic performance in the first quarter. But the figures, together with unchanged wholesale prices in May, indicate that recent worries about rising US inflation have been overdone.
Fears that US interest rates would begin to climb for the first time since the US economy emerged from recession last year abated and helped to depress the dollar, which lost almost a pfennig to DM1.6250. Against the pound it was more than half a cent down at dollars 1.5242.
The level of sales in May rose just 0.1 per cent against a 1.5 per cent gain in April, which was largely due to pent-up demand following severe storms on the East Coast in March.
Analysts said this evidence of renewed consumer caution was likely to continue. US consumers, like their UK counterparts, remain burdened by the large debts run up in the 1980s.
The steady spread of the German recession from manufacturing to the broader economy, meanwhile, received further confirmation from an unexpectedly strong decline in April retail sales. In western Germany sales fell by a real 1.4 per cent from March and were down by a real 2 per cent over the same period a year earlier.
Meanwhile, in Tokyo the Ministry of International Trade and Industry disputed the Bank of Japan's latest survey of Japanese business, pointing to a bottoming out of the economy for the first time since August 1989.
The survey shows that companies expect a recovery in profits in the second half and declining stock levels. Against that, they fear higher bank lending rates.
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