Retail revival steady but slow

Steady but slow growth in retail sales last month showed that claims of an early return of the feelgood factor have been exaggerated.

Annual growth in the volume of sales on the high street returned to its highest rate for just over a year, but the increase during March disappointed City expectations.

If figures for GDP due on Monday show the economy grew only modestly during the first quarter of this year, many analysts expect Chancellor Kenneth Clarke to sanction a further cut in the cost of borrowing. Next month's monetary meeting on 8 May, a few days after the local elections, is seen as the likeliest date for a move if there is going to be one.

''The trend in retail sales is quite good and getting better. But the improvement by itself does not rule out a further interest rate cut,'' said Adam Cole, an economist at brokers James Capel.

The volume of sales rose by a very modest 0.2 per cent in March, less than expected because February's figure was revised upwards. Sales grew 2.2 per cent in the year to March, the same as in January and otherwise the highest since February 1995.

Labour seized on the small monthly increase to throw doubt on the Government's claimsconfidence is reviving. ''These disappointing retail sales figures are confirmation of sluggish growth and consumers' apprehension about economic prospects,'' said Andrew Smith, shadow chief secretary to the Treasury.

However, most City economists reckon retail spending is picking up. Geoffrey Dicks at NatWest Markets said: ''Consumers may not yet be feeling good, but they are certainly feeling less miserable.''

The retail revival is patchy, however. In the latest three months textile, clothing and footwear stores have enjoyed a 1.4 per cent rise in the volume of sales, and food stores 0.7 per cent growth. On the other hand sales at non-specialised stores such as department stores fell 0.8 per cent and volumes at specialist shops like jewellers, butchers and bookshops were down 1.1 per cent.

Compared with a year earlier the strongest growth in the three months to March was seen by household goods stores, but their sales have been flat since the beginning of this year.

The value of retail sales grew by 7.1 per cent in the year to March, the fastest rate for five years. However, the Office for National Statistics cautioned that this year's early Easter had boosted March sales compared with last year.

Elusive feelgood factor, page 18