UK Retail Sales Growth Weakest Since March '06

British retail sales grew at their slowest pace since March 2006 in December, making it the worst Christmas for retailers in three years, a survey showed on Tuesday.

The British Retail Consortium said the value of sales last month rose 0.3 percent on the year on a like-for-like basis, the weakest growth since a decline in March 2006 and the poorest reading for a December since 2004.

Total sales, which include new floorspace, rose 2.3 percent year-on-year, also the weakest gain since March 2006, when sales were affected by the timing of Easter.

"This sets the scene for the new year ahead and like-for-like sales look set to move into negative territory as they did in 2005," said Helen Dickinson, head of retail at consultancy KPMG, which compiles the survey. 

The figures are likely to bolster market expectations that the Bank of England will cut interest rates again soon from 5.5 percent, although there is still considerable uncertainty whether that cut will be delivered as early as this week.

Only 12 out of 63 economists in a Reuters poll expect the central bank to follow up December's quarter-point reduction in borrowing costs with another on Thursday, although markets are pricing in a 40 percent chance of such a move.

Still, the BRC data adds to growing evidence that a rapidly cooling housing market, soaring energy prices and the prospect of an economic slowdown are hitting consumer morale and may encourage policymakers to consider easing policy in February.

BRC Director General Kevin Hawkins urged the BoE to cut rates immediately, however, and by a full half point.
     
Mixed Reports

News from retailers about Christmas trade has been mixed. Electrical goods retailer DSG International, which owns the Currys and PC World chains in Britain said its group sales were 1 percent down in the 11 weeks to Dec. 29 and issued a profit warning.

Furniture retailer Land of Leather also issued a profit warning, describing sales in the run-up to Christmas as "difficult", while clothes retailer Next said its December sales were "okay" and department store chain John Lewis has reported buoyant sales growth throughout December.

A survey by the Confederation of British Industry in mid-December also showed retail sales growth weakened in December, while figures from credit card firm MasterCard suggest retailers had to slash prices to tempt shoppers.

The BRC survey showed sales of clothing and footwear fell for the third month in a row compared with a year earlier and there were also falls in sales at home improvement stores and homewares and furniture retailers, reflecting the cooling housing market.

The survey covers the five weeks from Nov. 25 to Dec 29. The Office for National Statistics will publish official retail sales data for December on Jan 18.