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Apr 12, 2011
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UK retail sales tumble in March

By
Reuters
Published
Apr 12, 2011

April 12 - Retail sales fell at their fastest annual pace in nearly six years and house prices slipped in March, surveys showed Tuesday, underlining the fragile state of the UK economic recovery.


Shoppers in the heart of London'd mid range shopping district on Oxford Street. This is the busiest area for mainly fashion retail in the capital.

Britain's GDP shrank at the end of 2010 and growth this year is expected to be modest as public spending cuts, tax rises and high unemployment take their toll on consumer confidence.

The Bank of England, under pressure to cut above-target inflation, has kept interest rates at a record low of 0.5 percent for more than two years as it awaits signs that the economy is picking up speed.

The British Retail Consortium said like-for-like retail sales were 3.5 percent lower in March compared to a year ago, its biggest fall since April 2005.

Total sales, a measure which includes new floorspace, fell by 1.9 percent, the worst drop since the BRC began collecting the data in 1995.

"This is strong evidence of the pressure customers and traders are under," said BRC Director General Stephen Robertson. "Uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for 30 years."

The trade body urged policymakers to delay raising rates, saying a hike "would do more harm than good."

INFLATION EYED


Another key to any decision on rates will be the release at 9.30 a.m. of March UK inflation data. Annual consumer price inflation is expected to hold steady at 4.4 percent, more than double the bank's 2 percent target.

Raising borrowing costs before the economic recovery gathers momentum would ring alarm bells for British retailers who have issued a string of profit warnings in recent weeks.

One of the most high profile was Dixons, Britain's No.1 electricals retailer. Other companies to warn about the tough outlook include electricals group Kesa, carpet seller Carpetright, chocolate maker Thorntons and car parts retailer Halfords.

A second survey released Tuesday reinforced the downbeat message, showing house prices in England and Wales fell in March, although at a slower pace than in February.

The Royal Institution of Chartered Surveyors (RICS) said 23 percent more surveyors reported a fall rather than a rise in property prices in March, compared with 26 percent in February.

Tight lending, worries about a possible rate rise and doubts about the economic outlook have deterred buyers, RICS said.

"It seems that overall recovery for the national housing market is still some way off," said RICS spokesman Ian Perry.

(Editing by Patrick Graham)

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