Consumer Spend 'In Recession' As Sales Fall - Sky News

3:46pm UK, Thursday June 16, 2011

The largest part of the economy, consumer spending, has fallen back into recession as figures show a second quarter of falling retail sales.

Retail sales fell in May after a 'feelgood' April, according to analysts

Household spending, which makes up 60% of the UK's GDP, fell in the last three months of 2010, and again by 0.6% in real terms in the first quarter of 2011.

The retail sector, according to economists, looks unlikely to contribute much to the next set of growth figures for the overall economy, which flatlined over the same period.

The figures from the Office of National Statistics show retail sales in May, including fuel, were down 1.4% on April.

The numbers were, however, 0.2% higher than May last year.

Analysts have confirmed the British Retail Consortium's assessment that people spent more in April because of the warm weather and the double bank holiday for Easter and the Royal Wedding.

Senior UK Economist with Capital Economics, Vicky Redwood, said "The 1.4% monthly drop in sales volumes was the biggest since January 2010 and more than reversed April's 1.1% increase."

"We expect this trend to worsen as households respond to the intensifying squeeze on their real pay."

Howard Archer, the Chief UK Economist from IHS Global Insight, points out that the weak housing market is hitting spending on other household items and appliances.

"In fact, weak consumer spending is likely to be a key factor deterring the Bank of England from raising interest rates for some time to come," he added.