23 January 2003, 11:50  U.K. Retail Sales Probably Stagnated in December (Update1)

London, Jan. 23 (Bloomberg) -- U.K. retail sales probably stagnated in December during the peak holiday shopping season, the latest sign growth in Europe's second-biggest economy is slowing, analysts said in advance of today's government report. Retail sales for a five-week period to Jan. 4 likely were unchanged from November, according to the median forecast of 25 economists surveyed by Bloomberg News. Sales increased 0.1 percent in November. December figures will be released at 9:30 a.m. London time. ``Anecdotal and survey evidence have pointed almost unanimously to a disappointing Christmas for retailers,'' said Jonathan Loynes, chief U.K. economist at Capital Economics, a London-based consulting company. Consumer spending accounts for about two-thirds of Britain's economy. Dixons Group Plc, Europe's No.2 consumer-electronics seller, and JJB Sports Plc, the biggest U.K. seller of sporting goods, have said discounting among rivals is eroding growth. Manufacturers' confidence is the lowest in a year and more factories are idle than at any point in two decades.
Retailers resorted to earlier holiday discounting to boost sales. Marks & Spencer Plc, Britain's largest clothing seller, said fiscal third-quarter sales rose 7 percent on December clearance sales. Boots Group Plc, a U.K. pharmacy chain, reported sales at its outlets rose 7.5 percent in the same period after cutting prices and increasing promotions. Pressure to increase profit margins may lead retailers to compete for acquisitions as the battle over Safeway Plc suggests. Six potential bidders may vie for Britain's fourth largest supermarket chain.
Slumping Sales
Retail industry groups also reported slumping sales at the end of last year. A survey for the first two weeks of December by the Confederation of British Industry showed pre-holiday sales fell for the first time in a decade. A separate report by the British Retail Consortium and accounting firm KPMG International found sales last month grew at the slowest pace in more than two years. That survey covered the four weeks from Dec. 1 to Dec. 28. Consumer confidence is faltering in Europe's other large economies. French consumer spending rose 2.2 percent last year, compared with a gain of 3.2 percent a year earlier, government figures showed this week. German retail sales fell the most in more than three years in November. Shoppers are more pessimistic than at any time in the past 5 1/2 years in December, the EU's statistics office said this month. In Italy, business confidence rose from an 11-month low in January, a state-funded survey of 2,000 companies showed today.
Post-Christmas Pick-up
The Bank of England said yesterday 100 retailers quizzed by its regional agents reported ``poor'' sales in the first part of December as fewer U.S. tourists, terrorists warnings and job cuts in the financial district crimped demand in London. Sales ``picked up strongly immediately before Christmas and remained buoyant for the first few days of end-of-year sales,'' the bank said in the minutes of the January meeting of its Monetary Policy Committee. The bank has kept interest rates at a 39-year low for 14 months to encourage consumers to borrow and spend. The U.K.'s unemployment rate in December was 3.1 percent, the lowest since July 1975. Economists predict retails sales gained 4.5 percent from December 2001. ``The market is too premature looking for a sharp slowdown in consumer spending now as the fundamentals -- like employment, interest rates and income -- all remain very supportive,'' said John Butler, an economist at HSBC Bank Plc. //www.quote.bloomberg.com

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