Surprise jump in High Street sales

RETAIL sales unexpectedly jumped 0.5% during April against a backdrop of trading warnings from some of the High Street's biggest names. The figure beat analysts' forecasts of unchanged sales for the month, with the increase largely driven by sales in food stores and online shopping.

The rebound from a 0.3% fall in March surprised economists who were braced for bad news after survey data suggested sales had fallen to their lowest level in a decade.

The Office of National Statistics said sales during the first quarter were 0.2% higher than in the final three months of 2004.

Earlier this week, clothes retailer Next warned sales at it High Street stores had slipped, while Boots today said profits had plummeted by 11.4%.

Argos owner GUS also reported slowing sales as uncertainty over the General Election, poor weather and interest rates took their toll on the consumer, while French Connection added to the complaints that conditions are tough.

Despite the upbeat monthly performance, the ONS said the annual growth rate of retail sales was now weaker than at any time for two years. HSBC economist John Butler said the trend was lifted volumes by only 0.3% despite evidence of heavy discounting.

He said: 'Overall, the consumer is not in recession, as some surveys suggest, but the slowdown seems entrenched. Our concern is that spending has slowed sharply despite a background of higher employment, reasonable income growth, high consumer confidence and wealth and low interest rates.'

Andrij Halushka, economist with the Centre for Economic and Business Research, added: 'Today's news shows although there is no freefall in UK retail sales, the domestic demand is going to be weak through 2005. Combined with the latest labour market data and the minutes of the May MPC meeting, this news further lowers interest rate expectations.'