January saw retail sales volumes decline for the second successive month – the first time this has happened in three years, according to data released Thursday by the Confederation of British Industry.
Separately, seasonally adjusted data published by the Office for National Statistics equally lacked good cheer. Retail sales volumes fell 0.3% in January on top of a 0.4% fall in December. Sales of household goods sales were particularly weak.
Some onlookers believe this signals the end of Britain's retail boom in which the seeming indifference of consumers to world economic woes has kept recession at bay in the UK. But others insist it is too early to bury the nation’s consumer boom, citing robust new car sales and a record rise in personal borrowing.
There is also evidence that the downturn could be a self-inflicted wound provoked by some retailers who triggered the fall in volumes by aggressive price hikes. Store prices rose in the year to January after falling in November and December.
However, some entrail-rakers believe the adverse data will deter the Bank of England from implementing its expected series of interest rates increases. Opines Deutsche Bank’s George Buckley: “[Thursday’s] numbers give the Bank a breathing space. It can afford to wait until the second half of the year before raising rates.” The figures, added Jonathan Loynes of Capital Economics, “serve as a timely reminder that households are not entirely immune from the effects of the global economic slowdown”.
Meantime, the CBI has revised upward its 2002 economic forecast for the UK economy, predicting that improved prospects for exports will underpin modest growth. The employers’ organisation now expects the UK's annual growth rate to slow to 1.8% this year, compared with 2.4 per cent last year – an upward revision of 0.1 percentage points since its November forecast.
Growth will mprove to 2.7% in 2003, according to the CBI crystal ball.
Data sourced from: Financial Times; additional content by WARC staff