Further cut in rates tipped as retail sales dip
Thursday 20 June 1996
However, they predicted the Chancellor would deepen the rift opening up between him and the Bank of England if he does cut rates again soon. Minutes of Kenneth Clarke's May meeting with the Governor, Eddie George, released yesterday, reveal a difference of opinion, even though they agreed not to take any action then. According to the minutes, Mr George argued that: "There was little that monetary policy could do to offset the present, temporary, effect of weak overseas demand on manufacturing industry." Lower rates would simply risk stoking domestic demand with inflationary consequences.
However, Mr Clarke said below-trend growth and the complete absence of inflationary pressures made it worth considering reducing rates. City observers believe he acted against the Governor's advice in cutting a quarter point off base rates earlier this month.
Yesterday's retail sales figures provided further vindication for that move, following encouraging inflation figures last week. "It removes the last question mark over the Chancellor's judgement," Simon Briscoe, UK economist at Nikko Europe, said.
The volume of sales fell by 0.1 per cent in May, bringing their year- on-year growth rate a fraction lower to 2 per cent. It was the coldest May on record, which helped explain a 1.2 per cent drop in sales of clothing and footwear during the month. Economists said the weather probably reduced high street sales growth by 0.5 per cent.
Sales at food stores, which make up more than two-fifths of the total, were weak, too. They were down 0.2 per cent compared with the previous month and were only 0.4 per cent higher than a year earlier.
Sales by non-food retailers as a whole picked up, growing 4 per cent in the year to May against 3.2 per cent in the year to April. Household goods make up the strongest component, with sales volumes up nearly 10 per cent year on year.
"This is further evidence of an injection of demand, especially in the big-ticket area," said Leo Doyle, an economist at investment bank Kleinwort Benson. He predicted clothing sales would bounce back this month.
Anecdotal evidence continues to point to an upturn in spending. The latest figures from the John Lewis group speak of a "remarkable week's trade".
Midsummer swimwear season is well and truly upon us – but diving in at the deep end is no excuse for shirking the style stakes
- 2 Question Time's 'passionate highlander' is the William Wallace of the Better Together campaign
- 3 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 4 Tony Abbott embarrasses Australia by praising Japanese WWII military, ‘getting on the sake’ and posing for ‘crotch-shot’ photo opportunity
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Question Time's 'passionate highlander' is the William Wallace of the Better Together campaign
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...