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May 10, 2011
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UK retail sales leap, house price fall eases in April

By
Reuters
Published
May 10, 2011

May 10 - British retail sales surged at their fastest annual pace in five years and house prices fell more slowly in April, surveys showed, although the timing of Easter flattered the shop figures and the outlook is gloomy.


next, Britain's No 2 fashion retailer, on Bond Street, London

The British Retail Consortium said annual like-for-like sales rose 5.2 percent by value in April after March's 3.5 percent fall. That was the biggest gain since April 2006 when the timing of Easter also enhanced the numbers.

The annual comparison was skewed by the whole of the busy Easter trading period falling in April this year, while only part of it was included in the figures for last April, it said.

The boost for retailers from exceptionally sunny and warm weather, an extra holiday for the Royal Wedding and the Easter holidays did little to alter the picture of a generally choppy recovery of the UK economy, economists said.

"The BRC survey does not fundamentally change the underlying impression that consumers have become significantly less willing, and able, to spend in recent months in the face of serious headwinds," Howard Archer from IHS Global Insight said.

The UK economy has been limping back to growth after a shock contraction late last year and is facing strong headwinds from public spending cuts, high inflation and weak consumer confidence.

"These sales figures are a relief after the dire sales falls we saw in March, but they are not the full picture," said BRC Director General Stephen Robertson, adding that the March and April figures taken together showed a flat trend.

"The underlying pressures on the retail sector of climbing costs and depressed consumer spending will be problems for many months to come," he said.

Markets showed little reaction to the data, which did not alter views that the Bank of England would hold interest rates for another few months. Rate futures are not fully pricing in a rate increase until January 2012.

The Bank of England kept rates on hold at a record low of 0.5 percent last Thursday, despite inflation running at double its 2 percent target. It will give its latest assessment of the economy in its Inflation Report on Wednesday.

EASTER EFFECT

News from corporate Britain reflected both a weak growth outlook and rising prices: British low-cost airline easyJet said on Tuesday that first-half losses almost doubled,after the carrier was hit by rising fuel prices and tough economic conditions.

Fabrics maker Fiberweb said its profit would be hit by soaring raw material costs, adding that it may have to raise prices to counter higher costs.

Some companies such as Britain's No. 2 fashion retailer Next had already reported a boost from the good weather.

But economists have warned that the timing of Easter, combined with an extra public holiday for the royal wedding and unusually fine spring weather have complicated forecasts.

While there may be some benefit from tourism and people spending more during the holidays, there will be a negative impact from some shops, factories and offices being closed.


Food sales returned to growth after March's year-on-year decline, with barbecue supplies, beer and salads all doing well, the BRC said. The royal wedding and Easter helped lift sales of champagne, party food and roasting meat.

The fine spring weather also boosted sales of clothing, gardening equipment and electric fans. However, April was another hard month for sales of furnishings, flooring and more expensive electrical goods.

A second survey showed house prices in England and Wales fell in April at their slowest pace since July 2010, although the market is subdued and likely to remain so for some time.

The Royal Institution of Chartered Surveyors' seasonally adjusted April house price balance rose to -21 from -23 in March, better than the -23 consensus forecast.

By Peter Griffiths
(Additional reporting by Sven Egenter; Editing by Susan Fenton)

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