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Thursday, March 18, 1999 Published at 14:05 GMT

Business: The Economy

UK retail sales slump

Shoppers remained at home after the sales bargains dried up

BBC News' Sarah Boxhall: Retailers will have to work even harder for sales
UK shoppers appear to be deserting the High Street.

Retail sales fell 0.3% in February compared to the previous month.

The weak sales figures increase the chances of the Bank of England cutting interest rates next month.

Sales have still risen 1.3% compared to a year ago - but the rate of growth has slowed markedly in recent months as shoppers become concerned about the economic prospects.

[ image: Retail sales growth has fallen sharply from last autumn]
Retail sales growth has fallen sharply from last autumn

Recovery falters

Consumers are cutting back on spending, fearing they may lose their jobs.

There had been hopes that five cuts in interest rates in six months would help revive sales and relieve the pain for struggling retailers.

Shop sales bounced back in January after a disappointing Christmas.

Robert Barrie, CSFB: A small reverse, base rate cuts will continue next month
However January's increase appears to have had more to do with aggressive price cutting in the New Year sales than an increase in consumer confidence.

One City analyst said: "These are weak figures, both on the month and the underlying trend. There is no doubt the trend in retail sales is still negative. These figures will do nothing to prevent a further easing in UK borrowing costs."

Stronger retail figures in January contributed to the Bank of England's decision not to cut interest rates again in February after five cuts in the preceding five months.

Conditions 'still difficult'

The official sales figures confirm a British Retail Consortium survey which showed that trading conditions were still difficult, and retailers were forced to compete heavily on price.

Nevertheless the latest figures do provide some cause for optimism.

Retail sales in February were not as bad as some economists had forecast and a recent survey from the Confederation of British Industry suggested that trading conditions were improving.

The CBI's latest distributive trades survey showed 37% of retailers reporting an improvement in sales volumes in February compared with the same period last year. Some 35% said sales had declined in February.

The positive balance of 2% was in sharp contrast to the negative balance of 9% in January.

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