sales boost and the impact of interest rate rises

The end of the Euro 2004 sales boost and the impact of interest rate rises took their toll on UK retail sales in July, according to the latest CBI figures. Following two months of strong growth, the CBI's latest monthly Distributive Trades Survey shows sales have slowed and are expected to continue to do so during August.

However the trade body stressed that it was too early to anticipate a sustained downturn. Forty-eight per cent of firms said sales were up on a year ago while 24 per cent said they were down. The balance of plus 24 per cent compares with 43 per cent in the June survey.

The underlying trend in sales growth - as measured by the three-monthly average - remained high in July at plus 39 per cent, compared with plus 41 per cent in June, which was the fastest rate of growth since October 2001.

John Longworth, chairman of the CBI's DTS Panel, said: "Today's results confirm that the strong growth in May and June was boosted by sales of items related to 'Euro 2004'. Unfortunately the end of the football competition has coincided with the increasing impact of interest rate rises on consumer spending and poor summer weather for most of July.

"The Bank of England's objective of gently slowing this sector of the economy appears to be working, but it must continue to be cautious. Business wants to see a gradual, well-signalled approach to monetary policy when the MPC meet this week." The Bank is widely expected to increase UK interest rates again when it meets this week.