Rate cut looms after record retail retreat
PROSPECTS for lower interest rates loomed larger after eco- nomic growth prospects were dealt a blow by an unprecedented fifth consecutive monthly fall in retail sales in December.
The 0.6 per cent drop in sales volumes from November shocked economists, who had predicted a rise of 0.5 per cent, and increased the likelihood of the Bank of England’s Monetary Policy Committee (MPC) cutting rates at the end of this month.
Heavy discounting by retailers and a decisive general election result failed to tempt cautious consumers to increase their spending. Monthly sales have not risen since July, the longest run since records began in 1996.
Food stores were badly hit, with a 1.3 per cent fall in the quantity bought being the largest drop for three years.
Overall retail sales were down 1 per cent in the three months to December from the previous quarter.
Howard Archer, chief economic adviser to the EY Item Club, described it as “a major jolt for the economy” as the pound fell by more than 0.4 per cent against the US dollar to just over $1.30.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We had thought that seasonal adjustment issues relating to the later-than-usual timing of Black Friday were to blame for November’s fall and that sales would rebound in December; these data rebut our theory and strengthen the case for the MPC to cut rates.”
Figures from accountants BDO show the UK high street recorded its fifth straight year of falling sales.Average annual like-for-like in-store sales fell 0.6 per cent.