Surprise fall in high street spending
Friday 21 May 1999
Retail sales fell 0.5 per cent in April leaving a growth of 1.6 per cent compared with a year ago, according to official figures.
The City had expected no monthly growth and an annual rise of 2.3 per cent, and shares rose on hopes of a loosening of monetary policy. But many analysts focused on a strong rise in spending on household goods - the catalyst of the last consumer boom - and a survey showing a surge in consumer confidence.
The surprise slump was attributed to a fall in food sales, which dipped by 0.1 per cent in the three months to April, compared with the previous quarter.
Compared with a year ago, food sales rose by just 0.2 per cent, the lowest figure since modern records began in 1987.
But the Office for National Statistics, which compiled the figures, said the underlying trend was positive. The three-month rate, which irons out monthly blips, showed a rise of 1.8 per cent - the second consecutive increase. On the same basis, household goods sales rose 5.6 per cent on the back of a monthly gain of 1.7 per cent.
A European Commission survey found consumer confidence was back at the levels recorded in May 1998. The GfK index of consumers' readiness to make a major household purchase rose to a new high.
Neil Parker of Royal Bank of Scotland,said: "Pockets of activity remain, especially in the household goods sector. The Bank of England would be making a mistake if it cut interest rates again given the turnaround in consumer confidence."
Analysts said the data was difficult to read as it included Easter and the impact of the nail bombs in central London. Glenn Davies of Credit Lyonnais said: "The timing did create problems and it's not clear the statisticians did adjust properly for that. We are seeing a pick up, and it's more important to look at the three-month and six-month moving averages."
But Jeremy Hawkins of Bank of America said: "The retail sales data are at the weak end of expectations and fly in the face of the improvement in consumer confidence. This may not be enough to force the Bank's hand next month but prospects for more rate cuts medium-term are looking increasingly bright."
The British Retail Consortium, whose own survey recorded its first ever fall in sales in April, said the ONS data confirmed retailers' fears. "It is really saying much the same thing that we said earlier this month, that there is not a lot of demand out there. I would not say these figures are encouraging," said economist Pamela Webber.
Meanwhile, retail property is expected to see an acceleration in rental growth in the second half of the year according to a report by Donaldsons, the property agency.
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