According to an industry survey, retail sales dropped at their fastest rate in at least 22 years in June, writes Reuters. The results prompted further expectations of an early interest rate cut. The Confederation of British Industry did, however, warn that its monthly distributive trades survey was heavily affected by a comparison with a successful June 2004.
The recent spell of hot weather may also still have a positive effect on the month’s sales. The survey was, after all, taken before the onset of the good weather. According to the survey 23 per cent of retailers reported a rise in sales since a year ago, but 42 per cent said sales had dropped, resulting in a balance of -19. This figure falls far below both economists’ and retailers’ expectations. It is also the lowest since the survey began in July 1983.
John Longworth, chairman of the CBI panel in charge of the survey – and executive director of supermarket chain ASDA – said: “A year ago retailers were reaping the benefit of Euro 2004, which was credited with boosting sales of everything from football clothing to TV’s and beer. But while this may explain part of the record year-on-year decline now registered, there is no doubt that the underlying picture is also bad.”
Following the news, short sterling interest rate futures improved as general expectations were raised that the Bank of England would cut interest rates from 4.75 per cent in the coming months. The expectations balance was also at its lowest since the survey started. There is evidence that consumers are putting a hold on spending after the Bank of England raised interest rates five times between November 2003 and August 2004. The survey was conducted between 31 May and 15 June; 125 retailers participated in it.