UK retail sales on slide in March

Consumer spending is holding up, despite the credit crunch

Retail sales fell 0.4% last month in the UK, a bigger fall than expected, official figures show.

But sales in the three months to March were 2% higher than the last three months, the highest rate since July 2006, in a sign of consumer resilience.

And monthly sales growth was revised up in January and February, the Office for National Statistics said, indicating that consumer spending is holding up.

The annual rise of 4.6% was higher than the 4.3% anticipated by most analysts.

Despite concern about rising prices, food sales slipped only slightly on the month, down 0.1%, and rose 3% on the year.

However, textiles, clothes and footwear sales fell 1.7% on the month and 0.1% on the year, in the sector's first annual drop since December 1998.

February sales were revised up from 1% to 1.1%, while January sales were revised up to 1.5% from 1.1%.

Rate caution

The Bank of England lowered interest rates to 5% from 5.25% earlier this month, its third cut since December.

Its move was triggered by fears that disruption in financial markets and tighter credit conditions could lead to a slowdown in the wider economy.

We continue to have our doubts about how accurate a picture of high street demand the official figures are giving Vicky Redwood, Capital Economics

Analysts say this latest figure makes it less likely the Bank will cut rates soon.

Vicky Redwood, UK economist at Capital Economics, said the 0.4% fall was "not at all bad" and made it likely the Bank of England's Monetary Policy Committee would move cautiously in cutting rates further.

Figure confusion

Ms Redwood added: "We continue to have our doubts about how accurate a picture of high street demand the official figures are giving.

"Just about every other indicator... has weakened much more sharply. And this more gloomy picture sits far more comfortably with the plummeting level of consumer confidence."

Earlier this month, the British Retail Consortium (BRC) warned that retail sales declined in March, their first fall in almost two years.