Retail data fuel rate cut hopes

Shoppers are more reluctant to spend

A new survey has suggested that retail sales growth slowed unexpectedly in June, in a further sign that the UK's consumer-led boom may have run out of steam.

According to the Confederation of British Industry's distributive trades survey, 39% of retailers reported higher sales in June compared with the same period last year, while 29% said sales were down.

The balance of 10 points compares with a reading of 14 last month, and falls far short of the expected 17 point balance.

The CBI said the figures were doubly disappointing given one-off factors in June 2002 which should have flattered the year-on-year comparison.

"Consumer spending should have been much higher when compared with June 2002, when High Street spending suffered as a result of the Jubilee bank holidays, the late half-term, and the World Cup," said Alastair Eperon, chairman of the CBI's distributive trades panel.

Slowing down

The weaker than expected figures tally with official data last month showing that retail sales fell by 0.1% in May, and come on top of recent surveys pointing towards a slowdown in house prices and rising unemployment.

Some economists believe that taken together, these indicators signal that the UK's consumer-led boom, fuelled by rising house prices, low borrowing costs, and historically low jobless rates, is coming to an end.

The surge in consumer spending is credited with taking up the slack left by a weak manufacturing sector over the last two years, helping stave off recession.

Mr Eperon said the CBI's latest retail survey could reinforce the case for an interest rate cut when the Bank of England's monetary policy committee holds its next meeting on 9 and 10 July.

"With growth continuing to slow in July, there is nothing in this survey to stop the Bank of England cutting interest rates next week," he said.