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Last Updated: Thursday, 20 October 2005, 09:56 GMT 10:56 UK
High Street sales remain subdued
Shoppers in Oxford Street, London
Shoppers are getting the benefit of lower prices, ONS figures show
UK High Street sales remain subdued, figures from the Office of National Statistics (ONS) show.

Retail sales growth in the three months to September stood at 0.4% - less than half the 0.9% rate recorded for the three months to August.

Compared with the same period last year, sales rose just 1.0% - their slowest rate since January 1996.

However, month-on-month sales rose 0.7%, twice the expected rate, as food sales recovered during September.

Analysts forecasts had predicted a monthly increase of 0.3%.

The ONS said a bounceback in food sales had driven the monthly increase, but it added that mail-order sales declined sharply.

The figures for August were also revised up from no change to 0.2% growth by the ONS.

Discount bonus

There was a sign that shops have been cutting prices to stimulate sales, with the ONS showing that average prices in September were lower on average by 0.9% than a year ago.

One month's out performance does not mean the long-awaited consumer revival has arrived
Daragh Maher, Calyon

The average weekly value of sales in September slipped to 4.57bn, down 0.1% compared with September 2004 - the weakest level since records began just after the World War II.

Analysts said the latest retail sales figures made a cut in UK interest rates less likely when the Bank of England meets in November.

"Retail sales were significantly healthier than expected in September and August's sales were revised up, going a long way to killing off already fading hopes of a November interest rate cut," said Howard Archer, economist at Global Insight.

Hopes of a rate cut in November had already taken a knock earlier this week after minutes from the Bank of England's last Monetary Policy Committee (MPC) meeting showed it had not even debated a rate reduction.

Lower rates?

However, looking ahead, analysts suggested that the Bank of England may have to act to inject some life into the UK economy.

"One month's out performance does not mean the long-awaited consumer revival has arrived," said Calyon market strategist Daragh Maher.

Recent surveys from the Confederation of British Industry and British Retail Consortium have instead painted a dour picture of conditions on the High Street.

Recent results from many retailers - including Kingfisher and French Connection - have highlighted "tough market conditions" which have hit profits.

"The message is still very bleak for the UK High Street and the MPC is not off the hook yet for rate cuts," said David Brown, chief European economist at Bear Stearns.

"If anecdotal sector estimates about a very poor Christmas shopping season prove correct, the Bank of England will have to pull the stops out again for lower rates."




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