British retail sales retreat during May

The British retail sector suffered an unexpected fall in May.

The British retail sector suffered an unexpected fall in May.

The Office for National Statistics (ONS) reported that sales fell 0.1 per cent last month from April, the weakest performance since January's 1 per cent monthly fall and following April's 0.4 per cent rise.

City economists had on average expected a 0.2 per cent rise in sales so the numbers will disappoint analysts who have worried that consumer spending may be slowing more rapidly than is desirable given exports remain weak because of a moribund world economy.

Gilts and interest rate futures rallied after the numbers were released. The pound fell back slightly on the foreign exchanges to $1.676 and 69.40 pence to the euro.

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"This is generally quite weak. It does support the notion of a rate cut in July or August though there is of course a lot of data to come out before then," said Mr George Buckley, economist at Deutsche Bank in London.

The ONS said sales last month stood 3.1 per cent higher than a year earlier. On a three-monthly basis, which smoothes out monthly fluctuations, sales were up 0.5 per cent from the previous three months and 3.4 per cent higher than a year earlier, the weakest showing since July 1999.

Within the data, only household goods and non-store retailing and repair showed any strength while supermarkets suffered a small fall on the month.

Retail sales have been expected to slow since April's sharp national insurance and council tax rises, which have taken money out of Britons' pockets.

The Bank of England last cut interest rates in February, to a 48-year low of 3.75 per cent but has held them steady since. Most economists expect another quarter point cut or two before this year is out.