High Street sales sluggish

This Is Money13 April 2012

SALES on the High Street fell at the fastest pace for two years in the three months to February as shoppers stayed away. The Office for National Statistics said retail sales climbed 0.2% last month, as expected, but a revision of the key Christmas shopping period meant that sales fell 0.6% on a three month basis.

That was the weakest outturn since March 2003, when the run-up to war in Iraq dented consumer confidence.

The news sent shares in the retail sector falling, with Marks & Spencer, GUS, WH Smith and Woolworths down.

House of Fraser's share price also declined but this was on the back of poor trading figures announced this morning. The company said sales fell 3.4% in 2004, although pre-tax profits were up £37.9m to £56.5m during the year.

Before March 2003, retail sales had not declined on a three month basis since August 1998, the ONS said. Experts said the figures would make the Bank of England's next decision on interest rates even more difficult. The Bank has identified consumer spending as the key risk to its otherwise upbeat forecasts for the world's fourth largest economy.

Mark Miller, economist at HBOS Treasury Services, said: 'It does suggest rates are on hold for now. But there remains a risk of another hike coming before the end of the year.'

Howard Archer, chief UK economist at Global Insight, said: 'The Bank of England has highlighted weaker consumer spending as a major downside risk to the inflation and growth outlooks, so it seems likely to remain on the sidelines for at least another month and continue to monitor latest developments on the economy and the housing market.'

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