Retailers warn Bank against further rate rises
The head of the retail industry yesterday urged the Bank of England not to raise interest rates tomorrow to fight a "paper tiger" as new figures showed a fall in prices and sales on the high street.
The head of the retail industry yesterday urged the Bank of England not to raise interest rates tomorrow to fight a "paper tiger" as new figures showed a fall in prices and sales on the high street.
The British Retail Consortium said shop prices dropped to their lowest level this year in July as retailers embarked on a second successive month of steep sales.
Kevin Hawkins, the BRC's director-general, said: "High street prices fell to their lowest point this year but yet again retailers and consumers face the prospect of the Monetary Policy Committee raising rates."
He urged the MPC to adopt a "wait-and-see attitude" and assess the impact of their four rate rises since November before making an "unjustified and potentially dangerous" move. "Consumer confidence has weakened over recent months and when retail prices are falling it does not need another quarter, or still less half a [percentage point] rise, to tackle what increasingly looks like a paper tiger," he said.
The BRC's shop price index showed prices fell 0.7 per cent in July to take annual inflation to 1.2 per cent, down from more than 4 per cent in January.
High street sales also faltered in July as retailers felt the impact of rising interest rates and the end of Euro 2004, a separate survey showed. The CBI said its index of the number of retailers reporting sales growth compared with a year ago fell by a half between June and July.
John Longworth, the chairman of the survey, said the figures confirmed anecdotal evidence that strong growth in May and June was driven by football fans buying widescreen TVs and England soccer strips.
"Unfortunately, the end of the football competition has coincided with the increasing impact of interest rate rises on consumer spending and poor summer weather for most of July," he said. "The Bank of England's objective of gently slowing this sector of the economy appears to be working, but it must continue to be cautious."
Economists in the City said taken at face value, the CBI's index would translate into the first monthly fall in official retail sales data for more than a year.
"All in all today's reports support the case for a quarter-point rate rise on Thursday and not the more extreme half-point option mooted in some quarters," Alan Castle, at Lehman Brothers, said.
There were further signs yesterday that Britain's red-hot property market was finally showing signs of cooling. A survey by Rightmove, an estate agents' website, of 85,000 properties for sale found that asking prices fell £900, or 0.5 per cent, in the last three weeks of July. Meanwhile construction growth slowed in July from the previous month, the Chartered Institute of Purchasing and Supply said.
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