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Last Updated: Thursday, 16 June, 2005, 09:36 GMT 10:36 UK
New signs of UK retail slowdown
Shoppers in London's Oxford Street
Weak consumer confidence is seen as a threat to the UK economy
UK High Street sales crept ahead in May, marking their weakest annual rise in more than six years and adding to fears of a consumer slowdown.

Retail sales rose 0.1%, the Office for National Statistics (ONS) reported.

Although May's figure was in line with expectations, it brought the annual rate of increase down to 1.3% - the lowest level since January 1999.

Gloom on the High Street could raise expectations that the Bank of England may start cutting interest rates.

Clarion call

A consumer-led UK slowdown could quite easily turn into a consumer-led recession
David Brown, Bear Stearns International

The Bank's Monetary Policy Committee kept the cost of borrowing on hold at 4.75% last week, for the tenth month in a row.

But Bank governor Mervyn King has said that weaker consumer confidence is a major threat facing the UK economy.

"The soft May retail sales data shows that UK consumers are sliding down a slippery spending slope right now," said David Brown, an economist with investment bank Bear Stearns International.

"A consumer-led UK slowdown could quite easily turn into a consumer-led recession. This data is another clarion call to the Bank of England that they must switch to an easier interest rate policy very soon."

Challenging conditions

The weaker retail sales figures came as UK department store group House of Fraser reported a 3.2% fall in like-for-like sales in the first 19 weeks of its financial year.

"Trading conditions in the retail market have continued to be challenging in the early part of the year," the company said.

The drop in sales at House of Fraser follows similar declines at High Street icon Marks & Spencer, pharmacy chain Boots and budget clothing chain Matalan.

Separately, a report by employment agency Manpower on Tuesday suggested that confidence among retailers was subdued.

A survey for the group showed that while the UK employment market remained generally resilient, hiring intentions in the retail sector were weaker.




SEE ALSO:
High Street trend remains gloomy
19 May 05 |  Business
April slowdown hits retail sales
10 May 05 |  Business
Retail sales stagnate in February
08 Mar 05 |  Business
UK retail sales edge up slightly
01 Mar 05 |  Business
Sales 'spur shop price deflation'
10 Feb 05 |  Business
Christmas sales worst since 1981
21 Jan 05 |  Business


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