Retail slump to hasten rate cut

Fresh evidence that shoppers are holding on to their money is expected this week when the monthly sales data from the British Retail Consortium will show spending continuing to slow.

The BRC has brought forward its regular survey by a week in an attempt to reinforce calls for an interest rate cut to ease consumer debt worries ahead of the Monetary Policy Committee meeting on Wednesday.

'We have been calling for an interest rate cut for the last six months,' said the BRC director general Kevin Hawkins. 'It is interesting that at last the City savants are jumping on the bandwagon.'

The CBI is among other business groups calling for a cut in the base rate, now viewed by some economics analysts as likely to happen in August, though this week is an outside possibility.

'I don't think they will go [this] week, but it's going to be touch and go in August,' said John Butler, chief UK economist at HSBC. Two of the nine members of the Bank's Monetary Policy Committee voted for a cut in rates when they last met in June.

The BRC's monthly snapshot is expected to show like-for-like sales in June slipped about 1 per cent against a year ago. That is a slower than in May, but the BRC will focus on the three-month underlying trend. This is likely to head deeper into negative territory from the -1.5 per cent for the three months to May.

Last month's comparison against the same time a year ago has been boosted by retailers such as H&M and Zara starting sales a week earlier than last year.

Sunny weather also lifted sales in the final week of the survey. But retailers were braced for a slow weekend, predicting that millions of consumers will be watching Live8.