UK retail body wants, does not expect July rate cut

The head of the British Retail Consortium said yesterday he does not expect a rate cut from the Bank of England this week, but he renewed pressure on the Monetary Policy Committee to deliver his organisation's holy grail.

"I think there are now enough MPC members who are seriously concerned about the future of the economy and who are willing to be persuaded," Kevin Hawkins said in an interview to coincide with the publication of the BRC's latest sales data.

"Whether they are in a majority this time round I frankly doubt; if I were betting on it I would bet August rather than now, but I sincerely hope they take the plunge, because every month the decision is postponed, things get worse for retailers."

The BRC and many of its prominent members, such as Tesco and Kingfisher, have been calling on the British central bank's rate-setting committee to ease rates in order to counteract slowing high-street sales.

In fact, it has brought forward its latest set of monthly figures - originally timetabled for release next week - in order to exert pressure on the committee as it meets today ahead of a rate announcement tomorrow.

Some analysts have suggested that moving the release schedule erases some of the monthly Retail Sales Monitor's credibility as a serious economic indicator, but this is a charge Mr Hawkins vehemently rejects.

"At this particular time when the bank is seen to be in a period of indecision, it makes sense to do it sooner rather than later, particularly since other surveys in the past two weeks have pointed in the same direction, which is that things are getting worse," he said.

"What's the point in having a set of figures immediately after the bank's changed its mind or hasn't?," he said, adding the figures had not been weighted to reflect a four-week rather than five-week survey period.

In the event, the figures themselves - commissioned by the BRC but compiled by consultants KPMG - are not as strong an argument for a rate cut as recent figures in other months.

The June same-store sales figure showed a decline of 0.5 per cent, while the total retail pie grew by 3.5 per cent during the month. Three-month rolling same-store sales showed a 2.4 per cent decline, with total sales up 1.1 per cent.

Mr Hawkins said sales had been boosted by unusually hot summer weather in mid-June, plus an early start to summer sales that do not usually begin until July.

Despite the MPC's primary focus on controlling inflation, not boosting the retail sector, which has until recently notched up a string of successful years, Mr Hawkins believed the argument was running his way.

"If consumer confidence really nosedives, that has implications for the rest of the economy, and that be must be a concern to the Bank," Mr Hawkins said, pointing to the minutes of the last MPC meeting that showed two out of nine members had voted for a rate cut.

"It's quite clear that the bad news is having some effect, which is quite proper. The MPC is supposed to take note of what's happening and not sit on its hands while things get steadily worse."

Mr Hawkins said that what inflation there is in the economy is imported, mostly via higher energy and oil prices, and that prices in non-food retail in particular are actually falling.

And a quarter-point rate cut - which only a small minority of analysts actually expect tomorrow - would hardly trigger an inflationary spending splurge, he said.

"It won't trigger a high-street boom; it probably would not even affect behaviour for some considerable time. The priority for many households in the next year or two will be to rebuild their savings ratios."

"On its own a cut would make very little difference, but it would signal to those who are highly geared on mortgage payments that the interest cycle has now turned, and that any further movements would almost certainly be down."