UK retail sales drop, recovery in doubt
By Peter Griffiths |
March 9, 2011, Wednesday
|
Print Edition
Print Edition
BRITISH retail sales fell at the fastest pace in almost a year, house prices continued to drop and firms expect to hire only a small number of extra staff, data showed yesterday, implying a slow and tentative recovery.
The downbeat message from the three surveys chimed with Bank of England Governor Mervyn King's warning last week that Britain can expect a choppy return to health after a shock contraction late last year.
There was no reaction to the data on financial markets, which are not pricing in any rise in borrowing costs until later this year. Economists said the figures, which came on the heels of a soft survey of service sector activity last week, injected an element of doubt into how soon rates would start going up.
"We had been gravitating towards a hike, in terms of the voting pattern and rhetoric of the MPC, but the data have nudged that back a bit on balance," said Ross Walker, economist at RBS.
"This week's decision looks a little bit more straightforward, that is, no change. And maybe, with oil price developments, the general situation looks a bit softer. So although (a rate increase in) May is our forecast, it's not a done deal."
King and other BoE policy makers - expected to keep interest rates on hold at a record low tomorrow - are under pressure to take bolder action to curb consumer price inflation running at double its 2 percent target.
But, the central bank has repeatedly warned it must avoid hurting the fragile recovery by tightening policy too soon as it tries to cut inflation.
The risks were highlighted by February's weak retail sales figures from the British Retail Consortium, which fell at the fastest annual pace in 10 months.
The trade body said like-for-like retail sales were 0.4 percent lower in February compared to a year ago, after a 2.3 percent rise in January. It blamed the fall on declining household incomes and fears about the economic outlook at a time of public spending cuts and tax rises.
"Customers are cautious and are cutting back in a big way on non-essential spending," said BRC Director General Stephen Robertson.
The downbeat message from the three surveys chimed with Bank of England Governor Mervyn King's warning last week that Britain can expect a choppy return to health after a shock contraction late last year.
There was no reaction to the data on financial markets, which are not pricing in any rise in borrowing costs until later this year. Economists said the figures, which came on the heels of a soft survey of service sector activity last week, injected an element of doubt into how soon rates would start going up.
"We had been gravitating towards a hike, in terms of the voting pattern and rhetoric of the MPC, but the data have nudged that back a bit on balance," said Ross Walker, economist at RBS.
"This week's decision looks a little bit more straightforward, that is, no change. And maybe, with oil price developments, the general situation looks a bit softer. So although (a rate increase in) May is our forecast, it's not a done deal."
King and other BoE policy makers - expected to keep interest rates on hold at a record low tomorrow - are under pressure to take bolder action to curb consumer price inflation running at double its 2 percent target.
But, the central bank has repeatedly warned it must avoid hurting the fragile recovery by tightening policy too soon as it tries to cut inflation.
The risks were highlighted by February's weak retail sales figures from the British Retail Consortium, which fell at the fastest annual pace in 10 months.
The trade body said like-for-like retail sales were 0.4 percent lower in February compared to a year ago, after a 2.3 percent rise in January. It blamed the fall on declining household incomes and fears about the economic outlook at a time of public spending cuts and tax rises.
"Customers are cautious and are cutting back in a big way on non-essential spending," said BRC Director General Stephen Robertson.
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