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Last Updated:  Thursday, 20 February, 2003, 12:47 GMT
UK shoppers shunned the sales
oxford street sales
Shoppers stayed at home
Shoppers hunting for bargains in the January sales have not been as eager to spend as economists had hoped.

Retail sales in January were 1% lower than in December, figures from the Office for National Statistics (ONS) showed.

The gloomy data came as the Confederation of British Industry lowered its growth forecast for the UK economy to 2.2% in 2003.

The figure aligns the CBI with the growing number of forecasters warning that Chancellor Gordon Brown's estimate of 2.5%-3% growth this year is too optimistic.

The strength of consumer spending has been fuelling the UK economy, helping it to continue expanding despite the poor manufacturing sector.

Hard-pressed manufacturers

The ONS pointed out that monthly sales data could often be misleading, but admitted that the three month figures were also likely to be weaker than in the previous two years.

Estimated growth of UK economy 2003
Gordon Brown:
2.5-3%
Bank of England: 2.5%
CBI: 2.2%

"For the first time in years there is a genuine question mark over the consumer," said Geoffrey Dicks, economist at RBS Financial Markets.

The CBI also reported on Thursday that manufacturers had been hit by weak demand for the fifth year in a row.

"There is no let up from the recession in the manufacturing sector", the CBI said.

And manufacturers have forecast stagnating sales and sharply falling prices during the months to come.

Cash-strapped?

The news of weakness in the retail sector took the shine off better than expected figures for the level of public borrowing.

The public sector net cash requirement recorded a surplus of 11.9bn, exceeding market expectations of 10.1bn.

That means that public borrowing has fallen, giving the chancellor a slim chance of meeting forecasts made in his pre-budget report.

But on a cumulative basis, public finances are in a worse shape, as the chancellor tries to fill the gap between increased spending on health and education and lower tax receipts as a result of the slowdown in the economy.





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SEE ALSO:
London economy to defy City doom
19 Feb 03 |  Business
Brown 'in denial' on economy
12 Feb 03 |  Politics
UK economy slows
18 Feb 03 |  Business


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