High street sales grow at slowest pace in four years

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The Independent Online

Retail sales grew at the slowest pace in almost four years last month, fuelling fears that a consumer slowdown is hitting high street spending.

The latest data from the Office for National Statistics yesterday showed that the volume of sales rose by a lower-than-expected 0.3 per cent last month compared with March, and by 2.7 per cent year on year.

Over the three months to April, which smooths out the effect of the late Easter this year, sales were 0.4 per cent up on the previous quarter and 3.5 per cent higher than a year ago - the lowest rate for almost four years.

But business investment between January and March this year rose for a second successive quarter, gaining 0.8 per cent on the last quarter of 2002, and 1 per cent higher than a year ago, as company spending rose in both the manufacturing and service sectors.

Simon Rubinsohn, the chief economist at the stockbroker Gerrard, said: "[The] figures suggest that companies may, indeed, be coming to the aid of the economy at the same time as households adopt a more cautious stance."

The ONS data came as the latest manufacturing survey from the Confederation of British Industry revealed that improved optimism among manufacturers since the end of the war in Iraq had failed to offset weak demand and falling prices.

The CBI's monthly industrial trends survey revealed that manufacturers' order books were as weak in May as they had been in April, and continued to be significantly below "normal" levels.

"So far there is little sign of any 'Baghdad bounce'," the CBI's chief economist, Ian McCafferty, said.

"The decline in sterling in recent months should help ease the pressures on exporters, but they are having to battle against weak demand in their key markets and increasing orders will depend on a good recovery in overseas markets. That remains some way off."

In its quarterly economist forecast yesterday, the CBI downgraded its growth estimates for the rest of the year and warned that government borrowing and unemployment will rise as a result.

The business organisation cautioned that economic recovery is still some way off, thanks to the debilitating effect of weak global demand. It cut 0.1 per cent off its predictions for GDP growth to 2.1 per cent this year. For 2004, the CBI expects growth to come in at 2.5 per cent, against Gordon Brown's forecast of 3 to 3.5 per cent.

The difference means the CBI expects public sector net borrowing will rise to £27.3bn this year, slightly higher than the Chancellor's £27bn forecast, before jumping to £32.3bn. Mr Brown is forecasting a £24bn deficit in 2004/5.