Retail sales growth slows

As the Bank of England begins a two-day meeting on interest rates, Britain's frenetic shopping spree is beginning to flag, according to figures published today.

A Confederation of British Industry survey showed the slowest retail sales growth for seven months in May.

Coupled with a still feeble industrial recovery, the retail sales figures may be enough for the Bank's monetary policy committee to leave rates unchanged for the seventh month running.

The CBI said that 49% of firms reported higher sales than a year ago, while 24% said that they were down.

That left a positive balance of 25%, compared with a 14-year high of 57% in April, which the CBI attributed to a bumper Easter and good weather.

"All the evidence in today's survey points to a gradual slowdown in consumer spending. With prices rising at the slowest rate for 15 months, inflationary pressures are diminishing," said Alastair Eperon, chairman of the Distributive Trades Survey.

Meanwhile a closely-watched survey compiled by the Chartered Institute of Purchasing and Supply showed a slowdown in manufacturing growth.

The survey's index recorded 52.9 in May, compared with 53.2 in April. Economists had forecast a reading of 53.5. A figure above 50 indicates expansion, while one below shows contraction.

CIPS said that the figures signalled growth of the overall manufacturing economy in May, "although the rate of growth was shown to have eased slightly from the previous month".

As the MPC began its deliberations, the Engineering Employers' Federation warned that 90,000 jobs could go this year as the industry faces a "long slow climb" out of recession.

Traditional industries such as metals and mechanical engineering are still in decline and output and orders are falling across the sector, an EFF report said.

"There are some signs of improving confidence, but little tangible evidence of actual growth while the lid on prices remains as tightly sealed as ever," said EEF chief economist Stephen Radley.

"The MPC must continue to ignore the clamour for higher interest rates from those who see inflation lurking round every corner and wait for concrete evidence of a strengthening recovery before acting."

The MPC last month voted unanimously to keep rates at 4% despite growing worries about the housing boom. The surges in house prices was underlined in figures released Monday by mortgage lender Halifax. They showed a record 4.2% jump in house prices in May, leaving them 18.5% higher than a year ago.

But all 28 economists polled by Reuters last week expected the MPC to wait at least until July before increasing the cost of borrowing.

Rates are at their lowest for 38 years and the MPC has been accused by critics of losing control of the rampant house market.