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Wednesday, May 5, 1999 Published at 12:07 GMT 13:07 UK

Business: The Economy

Retail gloom lifting

Retailers are looking forward to better times ahead

Shoppers are beginning to start spending again but need another interest rate cut to encourage them to splash out more, says the Confederation of British Industry (CBI).

In what is generally seen as an early snapshot of consumer confidence trends, the CBI Distributive Trades Survey found that in April 41% of retailers reporting sales increases, against 26% reporting declines.

Taken with a raft of recent surveys, including one on Tuesday suggesting that the worst may be over for UK manufacturing, it is further evidence that the UK economy is regaining its health after a bleak winter.

[ image: Spending up slightly]
Spending up slightly
The CBI survey found that although the overall balance between optimistic and pessimistic shopkeepers changed little from March, longer term trends were brighter.

On a three month average 10% more retailers had seen sales rise than fall. That compares with a month ago when there was a positive balance of only 2%.

Alastair Eperon, chairman of the CBI survey's panel, said that a further cut in interest rates was required to ensure that the turnaround continued.

Rate cut needed

He pointed out that even with the recent improvement, the figures were still a long way short of their position a year ago when 24% more shopkeepers had rising rather than falling sales.

There was also little exhuberance found among retailers in the look ahead to the the next six months, with the optimists outweighing the pessimists by just 6%.

That is still a major turnaround from last November when the same question found there were 14% more pessimists than optimists, but is still short of the heights of August 1996 when the positive balance was 37%.

Mr Eperon said the slight increase in sales volumes for the second month running is an "encouraging sign" for retailers and indicates that consumers are beginning to spend again.

But he added that with pockets of the retail sector still reporting sales down on a year ago, "the momentum needs to be maintained".

Motors in reverse

"We believe that with inflationary pressures weak and uncertainty about economic recovery this year, a quarter percentage interest rate cut would be a prudent move by the Bank of England's Monetary Policy Committee and should help to encourage consumers back into the shops," said Mr Eperon.

Retailers of footwear and leather goods, specialist foods and off-licences reported "strong" increases in sales volumes compared with last year, although booksellers, confectioners and furniture and carpet stores reported a downturn.

Motor traders reported a significant fall in volumes of sales in April, following the large increases seen in March resulting from the new date for the new car registration plate.

April's fall in sales was much greater than expected leaving motor traders now more cautious.

The survey covers 15,000 outlets of firms responsible for 40% of employment in retail, wholesale and the motor trades.

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