M&S to warn of slowdown on high street
Bank of England expected to ignore pleas from Stuart Rose despite fears of looming consumer recession
Marks & Spencer, a flag bearer for the retail industry, will on Tuesday warn of slowing consumer spending amid fears that a UK slowdown could lead to a full-blown recession.
Chief executive Stuart Rose will say he is "cautious" about M&S's pros- pects for the rest of the year and will support calls for an interest rate cut when the Bank of England Monetary Policy Committee meets on Thursday.
He will also say that M&S's like-for-like sales are still growing, but at a markedly slower rate. However, a store refurbishment programme is expected to have paid off for the retailer as it prepares for the critical Christmas trading period.
Mr Rose's call for a cut in the base rate from 5.75 per cent is likely to fall on deaf ears, with Governor Mervyn King and his eight-strong panel set to wait until the new year before triggering monetary easing.
"The cumulative increase of five rate increases is now squeezing UK personal disposable incomes, and there are clear signs that the housing market is softening," said David Kern, economic adviser to the British Chambers of Commerce. "Global risks are again worsening, and there are new concerns over the strength of many international banks. The case for an early interest rate cut is strengthening."
Michael Saunders, chief economist at Citigroup, said that recent speeches from MPC members Charlie Bean and Kate Barker had in effect ruled out the chances of a reduction.
"Whether or not the MPC cuts in November, we expect that slowing growth will reduce inflation risks and will prompt the MPC to cut rates in coming quarters," said Mr Saunders. "Our base case is for a 50 basis point easing in total during 2008, starting in the first quarter, but delay could imply that even more easing will be needed."
He said that the Bank's reluctance to cut rates was motivated by "scepticism over the importance of housing wealth effects on consumer spending".
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