Food sales slump in August, could renew calls for further rate cuts |
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Fri, 16 Sep 2005 06:05
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LONDON - The Office for National Statistics revealed today that retail sales in the country in August were flat and that the increase in spending on general merchandise was negated by the gloomy business at food stores.
The retail merchants are calling this the "toughest market conditions" that they have faced in many years. Analysts said that the ONS figures were way below the expected 0.2 percent rise and that these would again add fuel to calls for a further rate cut by the Bank of England. The Bank had obliged businesses and had reduced the rates by a quarter point just last month and it was generally accepted that the Bank was loath to cut the rates again as some analysts and organizations had demanded.
The Bank's stand had received a boost when it emerged that the economy was slowly stabilizing although the manufacturing sector did caused some furrowed brows. This was largely due to the collapse of auto giant MG Rover in April and the subsequent job losses that it had entailed. However, in June and early July, the flagging economy revived a bit and the Bank helped its cause by cutting interest rates in August.
But now these latest figures point that the revival may have been a mirage and that the underlying problems have not been solved thoroughly. The sales for textile, clothing and footwear rose by 0.2 percent, but these gains were offset by the 1.2 percent dip in food sales. Philip Shaw, chief economist at Investec said, "Today's figures are a stark reminder that the high street boom is over and that the next move in interest rates is likely to be down."
Next, the fashion retailer has released figures, which show that like-for-like sales have hit the lowest mark in over a decade. Kingfisher, the home improvement firm also joined Next in saying that the market conditions were very tough. Standard Chartered economist Gavin Redknap said that these figures should send alarm bells ringing for the Bank of England, "This will be souring news for the Bank of England, which is counting on a pick-up in consumer activity to help drive growth higher in the months ahead. While the consumer slowdown hasn't turned into outright consumer recession, its becoming obvious that a static housing market and creeping unemployment is doing enough to keep households' money at home."
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