Retail sales grew only 0.1% in December
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Your support makes all the difference.A cut in interest rates next month was hanging in the balance yesterday after figures showed that the high street had endured a miserable Christmas, but business confidence remained solid.
A cut in interest rates next month was hanging in the balance yesterday after figures showed that the high street had endured a miserable Christmas, but business confidence remained solid.
Retail sales grew 0.1 per cent in December, the weakest for 10 months and well below City forecasts of 0.5 per cent. The little extra growth was won at the cost of falling prices, the figures showed. The "deflator" - a measure of high-street inflation - showed that prices fell by 0.6 per cent, twice as fast as November.
The figures appear to confirm the picture painted by individual retailers; that shoppers did not return to the high street in the numbers hoped for. They also echoed inflation figures on Tuesday showing that prices of clothes and household goods fell at their fastest rate for a half a century last year.
David Hillier, UK economist at Barclays Capital, said: "This is the first bit of domestic news that suggests rates should be cut sooner rather than later."
But not all analysts were convinced of this case, pointing to a 1.3 per cent rise in sales over the last quarter of 2000, compared with 0.3 per cent in the second quarter. "To argue that these data indicate a slowdown in consumer demand... is not only fallacious but also dangerous," said Richard Iley at ABN Amro.
A survey by the British Chambers of Commerce showed that confidence among services and manufacturing firms improved in the last quarter of 2000. A poll of 7,500 companies in December showed that optimism for profits and sales in the coming months rose in both sectors .
Services firms and manufacturers reported rises in domestic sales and orders and reported that the labour market was still tight. Manufacturers said the shortage of unskilled and semi-skilled labour was at a record high.
But the BCC focused on a sharp fall in manufacturers' export orders, which it said reflected the impact of the strong pound. It issued a strong plea for a rate cut.
Ian Fletcher, its chief economist, said: "We believe that the Monetary Policy Committee should be cutting interest rates by a quarter-point to cement confidence and kick-start investment in the sector, and to prevent further job losses in the manufacturing sector."
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