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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (35578)	8/19/2005 2:47:48 AM
From: mishedlo	Respond to of 116555

UK consumer slowdown fears eased by July retail sales upside surprise [The surprise was that it was not as bad as they thought - mish] Thursday, August 18, 2005 10:07:54 AM afxpress.com LONDON (AFX) - Fears of a sharp slowdown in consumer spending have been eased by news that retail sales in July outperformed market expectations for the second month running Despite the impact of the London bombs on July 7 and 21, sales held up better than expected, falling by only 0.3 pct on a monthly basis against forecasts of a more pronounced 0.5 pct decline That decline only partly reversed the massive 1.2 pct gain recorded in June and further reined in expectations of another interest rate cut from the Bank of England any time soon "The consumer has clearly slowed but the sharp deceleration of past months looks to have come to an end, at least for now," said John Butler, economist at HSBC. "Indeed consumer spending has proved incredibly resilient to quite a lot of bad news, like the bombings, and the lack of price discounting, according to the RPI data," he added Despite the relatively positive news, analysts don't think the retail sector is out of the woods yet and warned of the impact of lower employment, huge personal debt levels and the likelihood of higher taxes For now though, interest rates are on hold at 4.50 pct and unlikely to be cut again until November at the earliest. A cut then would only happen if the economic news deteriorates substantially, analysts said, especially as CPI inflation is above the 2.0 pct target "With consumer spending apparently remaining at the forefront of many investors minds -- not least due to the concerns expressed by the MPC as to whether the recent slowdown would prove to be temporary or would become more entrenched -- this supports the view that the MPC is unlikely to be cutting rates further in the foreseeable future," said UBS analyst Robyn Barnett. "This is consistent with our own view that interest rates remain on hold for the remainder of this year, before rising at some point in mid-2006," she added The prospect of further rate cuts in the coming months receded sharply yesterday after the publication of the minutes to the last meeting of the rate-setting Monetary Policy Committee The minutes of the August rate-setting deliberations, which delivered the UK's first rate cut in two years, took markets by surprise. The majority of 5-to-4 was closer than expected, with the surprise factor exacerbated by news that the BoE's governor Mervyn King voted against the quarter point rate cut in the key repo rate to 4.50 pct