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Thursday, 15 June, 2000, 11:56 GMT 12:56 UK
Modest May for shoppers
retail sales graph
High street sales saw only modest growth in May, according to official figures, providing further evidence that economic growth may be slowing.

The Office for National Statistics (ONS) said retail sales were 0.4% higher than in April and 3.6% higher on the year.

This was less than the City had expected and was well down on the annual growth rate of 4.7% registered in April.

The less erratic quarterly figures also showed modest growth of just 0.2% for the three months to the end of May - the lowest quarter-on-quarter increase for 17 months.

The ONS said there was some evidence to suggest that sales may have been depressed by the timing of Easter in late April.

The figures come hard on the heels of earnings data on Wednesday which saw the pace of wage rises slow sharply, easing fears that inflation could be set to rise.

Average earnings rose by 5.1% in the three months to April, down from 5.7% in the previous period, and below analysts' expectations.

Rate outlook

The figures are likely to further ease pressure on the Bank of England to raise interest rates again next month.

Many analysts now expect it to keep its borrowing rate on hold at 6% in July.

However, some urge caution in reading too much into the figures and play down suggestions that rates have peaked.

According to Adam Law at Barclays Capital, the unexpected weakness in May sales was largely down to a fall in food sales.

"As with yesterday's average earnings numbers, we would urge caution in reading too much into these numbers. Sales were driven largely by an unsustainable factor. You'd expect people to buy just as much food whether interest rates are going up or down," he said.

Michael Hulme at Lehman Brothers said the weakness of the figures were hard to square with robust anecdotal evidence from the Confederation of British Industry, John Lewis and others.

"We were thinking that if the risks were anywhere they were on the strong side," he said.

However, he noted that with recent UK data "all going one way" it was difficult to see the Bank of England raising rates in July.

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18 May 00 | Business
UK retail sales fall
14 Jun 00 | Business
Wages growth slows
07 Jun 00 | Business
UK rates remain stable
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