Retailers were hit by a bigger-than-expected drop in sales this month, according to a CBI survey of high street spending that is likely to spark further calls for ministers to reverse tough economic policies.
Retail sales fell at their fastest pace for a year in July and stores expect a further deterioration next month as hard-hit consumers clamp down on spending.
The figures will add to concerns that the economy is struggling to grow and that high streets could see further shop closures and cuts in workers during the summer.
The British Retailers’ Consortium said today that retailers had spent the last three months cutting staff and reducing their hours to save costs.
The balance of reported sales in the CBI distributive trades survey fell to -5 in July from -2 in June, the lowest reading since June 2010. It confounded hopes that an early start to summer discounting would drive sales higher.
Analysts had expected an improvement in the balance to zero, which would have indicated that sales were at the level they were this time last year.
The expected sales balance for August fell to -12 from +2 in July, also the lowest in a year.
“Given the importance of consumer spending, this immediately fuels concerns over growth prospects in the third quarter,” said IHS Global Insight economist, Howard Archer. “Indeed, following on from the markedly weaker CBI industrial trends survey for July, the economy seems to have started off the third quarter on the back foot.”
The British economy grew by a meagre 0.2 per cent between April and June after stagnating over the previous six months, increasing the pressure on the government to boost growth. But chancellor George Osborne’s room for manoeuvre is limited under his plan to slash the budget deficit. Some ministers have suggested the Bank of England’s monetary policy committee should engage in a fresh round of monetary stimulus should the economy stay weak.
MPC member David Miles said yesterday that there was a risk the country could fall back into recession, following similar comments by fellow committee member Martin Weale.
There was no explicit mention of the possibility of more quantitative easing in the minutes of this month’s policy discussion at the Bank, though it was made clear that monetary policy could change in either direction.
Financial markets expect the Bank to hold interest rates at their record low level of 0.5 per cent well into next year, and debate about a fresh round of quantitative easing may intensify if the economy falters.
Source – The Guardian