No let-up for High St misery

GLOOM in the struggling retail sector deepened today as a key survey confirmed March was another dreadful month on the High Street. Hit by the cold snap at the start of the month, retailers said sales were the worst for 13 years, according to a CBI report.

A net 9% said sales were lower than a year earlier, against a net 2% who had reported higher sales in February.

The survey, conducted between 1 and 16 March, does not include the crucial Easter break. But it suggests the consumer slowdown is gathering pace and will reinforce expectations the Bank of England will keep interest rates at 4.75% for an eighth month when its monetary policy committee meets next week.

CBI head of economic analysis Doug Godden said: 'For the third month, volumes failed to meet expectations. Some of this poor performance might be attributed to the wintry weather at the start of March and a reluctance to spend ahead of the Budget. But there is no doubt sales growth has slowed on an underlying basis since the start of the year.'

Furniture and carpet stores were hardest hit, followed by those selling hardware and china, then chemists, DIY stores and specialist food shops. Analysts are split on the outlook for consumer spending.

Some say a lack of confidence due to higher rates and the end of the housing boom will continue to hit the High Street. Others reckon it will pick up over the next few months, boosted by record employment, rising earnings and bargains galore. Consumer spending is key to the interest rate outlook. Further weakness could prompt the Bank to cut rates later this year, but a rebound could trigger a rate rise.

The pound fell while gilts and short sterling rose on today's report. James Knightley, economist at ING Financial Markets, said: 'The combination of slower activity and the likelihood that inf lationary pressures will remain very weak support our view that rates have probably peaked.'