High-street sales growth slides to 18-month low

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The Independent Online

High-street sales in May grew at their slowest rate since the UK last flirted with recession, according to the latest figures to indicate the economy is slowing.

High-street sales in May grew at their slowest rate since the UK last flirted with recession, according to the latest figures to indicate the economy is slowing.

Official figures yesterday showed retail sales volumes rose 0.4 per cent in May, leaving annual growth of 3.6 per cent down from 4.7 per cent in April.

The weak monthly performance means retail sales have grown just 0.2 per cent in the last quarter, the slowest increase since December 1998 when many commentators were forecasting a recession on the back of the global downturn triggered by the Russian crisis.

Philip Shaw, UK economist at Investec, said: "This is hardly the stuff recessions are made of, but it was well below the market consensus." Jonathan Loynes, of HSBC, added: "The numbers are supportive of other recent data suggesting that interest rates have peaked at their current level."

But the data contained ammunition for interest rate hawks, with signs that high-street deflation is easing and strong growth evident in the important household goods sector.

The detailed breakdown showed sales by food stores fell 0.4 per cent, while non-food retailers rebounded strongly, growing 0.8 per cent in May after falling 0.5 per cent in April.

Household goods sales are more than 10 per cent higher than a year ago, measured on a quarterly basis.

The Office for National Statistics said the trend was of similar underlying growth to April. A statistician said some shops had reported consumers taking a break from shopping after the run of bank holidays in April.

"There is still life in the UK consumer sector," said Audrey Childe-Freeman, of CIBC World Markets. Michael Saunders, of Salomon Smith Barney, focused on the retail sales deflator, which was now down 0.8 per cent compared with a low of minus 1.7 per cent in January. "There are clear signs that the pace of deflation on the high street is easing," he said.

The weak headline retail sales figures follow the sharpest fall in average earnings for 14 years, a slowdown in the housing market and further contraction in the manufacturing sector.

The Bank of England will have to weigh this up against a further fall in unemployment, consumer spending growing at over 5 per cent and a recent surge in the oil price when setting interest rates.

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