UK Retail Sales Helped By Big Price Cuts
Official figures reveal large price cuts have helped boost UK retail sales for the month of January.
Despite a 0.2% fall in December and huge disappointment over the festive period, last month's figures were up by 0.8%. The increase was marked mainly by retailers significantly dropping the prices of their electrical goods.
Underlying growth remains steady but is up by 0.6% compared to the previous 3 months which means that any further interest cuts will probably not come as early as analysts had anticipated.
John Ward of the Centre for Economics and Business Research (CEBR) said, "It now seems likely that interest rate cuts, although forthcoming over the next year, will be at a slower pace than had been initially expected."
He added, "Our view is that a further slowdown in the UK economy is inevitable but that it will be more modest - but also more protracted - than many expect."
Consumer spending has without doubt slowed down over the past few months due to the uncertainty stemming from the credit crunch. With downwards trends hitting both the property and financial markets, consumer confidence has clearly been affected.
Many homeowners are worried that tighter lending conditions will affect their remortgage plans as thousands of fixed-rate mortgage deals come to an end this year. As a result, the average homeowner will be faced with a £100 increase in mortgage repayments, pushing their already tight budgets to the maximum limit.
Chief UK economist at Global Insight, Mr Howard Archer stated: "We strongly suspect that retail sales were lifted in January by increasingly pressurised and price-conscious shoppers being particularly keen to take advantage of genuine bargains in the sales. Nevertheless, the marked pick-up in retail sales in January reinforces our belief that the Bank of England is unlikely to cut interest rates again until May."
The Bank of England cut interest rates earlier this month by 0.25% to the current level of 5.25%. It was the second cut since December 2007 following signs of a slowdown in growth.
Published on February 22, 2008
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