Rate rises check High Street boom

The end of Euro 2004 hit sales of TVs, beer and clothing

Rising interest rates and a post Euro 2004 hangover have combined to slow retail sales, according to the CBI.

Following two months of strong growth on the High Street, July saw a marked slowdown with sales of TVs, beer and clothes among items affected.

In the CBI's latest distributive trades survey, 48% of firms said sales were up last year while 24% reported that sales were down.

The CBI said it was too early to talk of a "sustained downturn", however.

Reduced activity

The July survey's positive balance of 24 compared unfavourably to the 43 recorded in June and May's 51 figure, which at the time represented the fastest growth in two years.

Nevertheless, underlying sales growth remained strong in July.

Over a three month period sales growth totalled 39%, compared to 41% in June.

Successive quarter point interest rate rises in May and June and the end of Euro 2004-related sales promotions checked activity, retailers reported.

Chemists, specialist food stores and furniture retailers reported the strongest growth, while grocers and confectioners saw a decline in sales.

Orders down

Orders placed with suppliers dropped, with a positive balance of 17 for the month compared to 28 in June.

"Unfortunately the end of Euro 2004 has coincided with the increasing impact of interest rate rises on consumer spending and poor summer weather for most of July," said John Longworth, chairman of the CBI's survey panel.

"The Bank of England's objective of gently slowing this sector of the economy appears to be working but it must continue to be cautious," he added.

The Bank of England's Monetary Policy Committee will decide on Thursday whether to raise interest rates further at its monthly meeting.

Some analysts have claimed that further rises are inevitable after recent data showed British manufacturing enjoying its fastest growth in nearly a decade.