Retailers have warned the Bank of England that raising interest rates would do "more harm than good" after posting their worst monthly sales for at least 16 years.
Chains selling big-ticket home and furniture products "suffered the most" in March, but clothing retailers also had a month to forget, according to the British Retail Consortium-KPMG Retail Sales Monitor survey.
Despite the positive impact of new shops and price inflation, total retail sales tumbled by 1.9 per cent in March, which means that sales volumes fell far more dramatically.
While retailers were up against a buoyant 6.6 per cent rise in revenues for the same month last year – boosted by Good Friday and Easter Saturday falling within the March trading period – last month's sales were the worst since the BRC started the survey in 1995. The dire figures follow profit warnings from retailers including HMV, Carpetright, Mothercare and Dixons over recent weeks.
Like-for-like sales fell by 3.5 per cent in March, the BRC said, which was also the worst performance for 16 years, apart from a 4.5 per cent plunge in April 2005. Stephen Robertson, the director general of the BRC, said non-food retailers were particularly hard hit. "Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to," he said. "These pressures aren't going away and the arrival of higher national insurance is likely to compound them in the immediate future."
The Bank of England's Monetary Policy Committee could deal consumers a further blow next month by raising interest rates from 0.5 per cent, but Mr Robertson urged it not to.
He said: "The next interest rate decision is a difficult balancing act for the Bank of England but, for now, supporting our weak economy must be the priority. Inflation is coming mainly from temporary and external price shocks – VAT, world commodity prices and the weak pound – not wage or consumer-driven increases. Increasing interest rates would do more harm than good."Reuse content