Retail sales grew more slowly in May, although they beat expectations, and firms are cautious about the outlook for growth next month, a survey by the Confederation of British Industry showed.
The figures came as Bank of England policymaker Paul Fisher said he was “nervous” about the strength of household demand against a backdrop of falling real wage growth, and said it was too early to contemplate raising interest rates.
The CBI Distributive Trades survey’s reported sales balance fell to +18 in May from +21 in April. That was above analysts’ expectations for a reading of +10, but below its long-run average.
And retailers reckon sales growth will continue to slow next month, with the expected sales balance for June at +14.
“Although the CBI survey indicates that retail sales held up better than feared in May, the underlying trend still indicates that consumers have become significantly less willing, and able, to spend in recent months in the face of serious pressures,” said Howard Archer, economist at IHS Global Insight.
Bank policymakers are divided over how to tackle soaring inflation without derailing Britain’s fragile economic recovery. Most of the nine-member Monetary Policy Committee reckon it is too early to start tightening policy, although three are in favour of immediate hikes.
“I believe there remains time to allow the economy to recover before the eventual tightening begins,” Fisher, who has consistently voted to leave rates at their record low 0.5 per cent, said in a speech.