Late Easter blamed for fall in retail sales

Retail sales fell for the first time in almost four years, according to figures from the high street's lobby group.

The British Retail Consortium painted a weaker-than-expected picture of the British economy, reporting a 0.6 per cent decline in like-for-like sales volumes compared with a year earlier.

The data is the latest to highlight the slowdown on the high street and strengthen the case for a cut in interest rates next month, economists said. They follow a weak February for retailers and will put pressure on the Chancellor following his optimistic growth forecasts in last week's Budget.

The BRC acknowledged the figures were distorted by the late timing of Easter but Bill Moyes, its director general, said: "It's clear that the trend is moving downwards at a worrying rate." The absolute sales figure slowed to an annual rise of 2.1 per cent compared with an increase of 3.9 per cent in February.

The fall in sales volumes, which followed a like-for-like annual rise of just 1.3 per cent in February, was the weakest performance since April 1999. "Since [the decline] happened ahead of the tax rises coming into effect this month, that's maybe the major cause for concern," Ross Walker, a UK economist at Royal Bank of Scotland, said.

There was more encouragement elsewhere, however, with separate figures showing manufacturers had increased the price of goods leaving factory gates last month at the fastest rate in more than two years. The Office for National Statistics said output prices rose 0.5 per cent in March against the previous month, taking the annual rate of price inflation to 1.9 per cent – its highest since December 2000. This was well ahead of City expectations.

Economists said the rise was unlikely to derail the chances of a rate cut, given that it reflected the spike in the oil price ahead of the Allies' invasion of Iraq. The ONS said petroleum product prices rose 2.7 per cent on the month and by 12.3 per cent on the year – the biggest annual jump since November 2000. Stripping out energy costs, however, core output prices (also excluding food and drink) rose by a more modest 0.1 per cent on the previous month.

Simon Rubinsohn, at Gerrard, said: "It may just suggest that the worst for the hard-pressed manufacturing sector is in the past. That twin-speed economy looks to have been thrown into reverse."

Input prices, or the cost of raw materials bought by factories, were broadly unchanged month-on-month. Geoffrey Dicks, at RBS Financial Markets, said: "Overall, this suggests some modest revival in the manufacturing sector – consistent with the official production data in January and February."

Opec, the oil cartel, responded to the near 25 per cent fall in the price of a barrel of crude since the end of last year by proposing to mull curbing supply quotas.