Fall in retail sales coincides with surge in inflation for manufacturers

Click to follow
The Independent Online

Confidence in the UK's fragile economy suffered a double blow yesterday with new data showing falling retail sales and increasing inflation in the manufacturing sector.

Clothing retailers bore the brunt of the quickening pace of a consumer spending slowdown last month, recording their worst sales performance since October 1998. The Office for National Statistics said sales in clothes shops fell 1.5 per cent in April compared to March, with overall retail sales down 0.2 per cent, the second successive month of decline.

The retail sector's performance was better than some analysts had forecast, but appears to have been buoyed by a strong performance from the leisure sector, where the massively popular launch of the latest instalment in the Grand Theft Auto games series had a significant impact.

Stripping out this one-off effect, leading economists warned the UK was facing an increasingly difficult environment, particularly with a CBI survey suggesting the prospect of soaring inflation in the manufacturing sector.

"We are now clearly seeing the slowdown in the housing market feed through to the high street with shoppers passing up on big-ticket purchases," said Jeremy Rance, of Barclays Bank.

"Inflation also continues to add to the problem, with retailers not just facing an increase in raw materials and energy costs, but also import costs as the pound weakens against the euro."

The CBI said yesterday that more manufacturers than at any time since 1995 now expect to increase their prices over the next three months. Ian McCafferty, the business group's chief economic adviser, said: "The survey also shows that the sector is now being affected by the slowdown seen in other areas of the economy."

Stephen Robertson, director-general of the British Retail Consortium, added: "This official data confirms our own findings that overall retail sales growth is slowing significantly."