British Retail Consortium urges rate cut as sales slide

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The Independent Online

The Bank of England must cut rates this week to rescue the high street from a "consumer-led recession", the head of the retail industry said today.

The Bank of England must cut rates this week to rescue the high street from a "consumer-led recession", the head of the retail industry said today.

The British Retail Consortium said that the volume of goods passing through high street tills last month fell 2.4 per cent compared with May last year. It was the second fall in a row, following April's record 4.7 per cent drop.

"These figures should remove any lingering doubt that we are now in a consumer-led recession," said Kevin Hawkins, its director general. "We urge the Bank of England to reduce interest rates at this week's meeting." He said that there had been little or no improvement in any sub-sector of the retail industry with some reporting a further downturn.

The figures came a day after Verdict, a research company, warned that growth on the high street during 2005 would be the slowest for over 40 years. Total sales grew by 1.4 per cent, a rebound from April's 1.3 per cent fall, but still way below the average of more than 4 per cent over the previous two years.

The BRC said that caution by consumers and a slowing housing market had continued to hit sales of so-called "big ticket" and household items. The Bank's nine-member monetary policy committee meets tomorrow and Thursday against a background of slowing growth but rising inflationary pressure. All of the 45 City economists polled by Reuters forecast no change for the 10th month in a row with half of those voicing an opinion forecasting the next move will be a cut.

Robert Barrie, the chief UK economist at CSFB, said: "Recent data clearly point to weaker economic activity so we expect some discussion of a rate cut of this meeting."

Snapshot surveys last week of the UK's three main sectors outside retailing - services, manufacturing and construction - showed growth in all of them either fell or slowed sharply in May.

The BRC's sectoral breakdown showed the main casualties were clothing, footwear, department stores, DIY and gardening.

Helen Dickinson, head of retail at the report's sponsor, KPMG, said the poor weather had also contributed to the downturn.

"Although this excuse if often trotted out as the reason for sluggish sales, there is no doubt that it really has impacted trading this month," she said.

There were mixed signals from the employment market with a survey of recruitment consultancies showing an increase in demand for staff but a decline in pay pressures.

The growth in permanent staff placements was the fastest in six months in May while starting salaries rose by the smallest amount in three months.

Malcolm Barr, a UK economist at JP Morgan Chase, said: "There is no sign that the fabled tightness of the labour market is generating any significant inflationary pressure."