Death of the consumer? Not yet

THERE was mixed news from the high street yesterday with the release of official figures that are certain to present an additional headache for Bank of England policymakers.

The Office for National Statistics said UK retail sales fell 0.4 per cent last month, with nearly every sector suffering declines. Analysts had forecast a fall of 0.3 per cent.

But despite the sag in spending in March, sales during the threemonth period were 2 per cent higher than in the previous quarter.

That marked the sharpest rise since July 2006 as alreadystrong growth in January and February was revised upwards.

An annual increase in sales of 4.6 per cent was higher than the 4.3 per cent anticipated by many analysts.

Signs of consumer resilience will heap pressure on the BoE’s monetary policy committee (MPC) to hold fire on aggressive interest rate cuts.

Minutes of April’s MPC meeting, published on Wednesday, showed that two policymakers had opposed this month’s decision to reduce borrowing costs by a quarter point.

Referring to the strong quarterly gain, Vicky Redwood of Capital Economics said: "The monetary policy committee aren’t going to ignore this. It certainly reduces the chances of any (rate] cut in May."

Howard Archer, chief UK economist at Global Insight, said it was "premature to announce the death of the consumer".

But he predicted that high street spending would "increasingly falter in the face of mounting headwinds", including a softer housing market.

CEBR economist Charles Davis said it was difficult to draw strong conclusions from the latest ONS survey, but added that the downturn in March suggested "the consumer slowdown may have begun".

The British Retail Consortium (BRC) seized upon yesterday’s news of the sharpest quarterly rise in sales in almost two years, arguing that the report painted an "overly rosy picture".

BRC directorgeneral Stephen Robertson said: "ONS’s own figures show nonfood prices falling at the fastest rate for more than 20 years, showing it is taking deep and widespread pricecutting to tempt customers to buy anything other than nonessentials."