| LONDON, July 29
LONDON, July 29 British retail sales fell this
month at their fastest pace in at least a quarter century and
consumers are finding it increasingly hard to get home loans in
a housing market downturn that threatens to derail the economy.
Bank of England data showed mortgage approvals -- loans
agreed but not yet made -- fell last month to a third of the
number approved a year ago. At 36,000 in June from 41,000 in
May, the figure points to further sharp falls in house prices in
the coming months ECONGB ECON.
Retailers are suffering. The Confederation of British
Industry's monthly retail sales balance fell to -36, its weakest
since the survey began in 1983, as sales of white goods,
furniture and carpets collapsed.
"Consumers are clearly reining back their spending. And with
the data earlier this morning showing that housing market
activity is continuing to slump, consumer spending is only
likely to weaken further," said Vicky Redwood of Capital
Economists say interest rate cuts are unlikely for now as
the BoE is having to contend with inflation that is running at
almost double its 2 percent target rate. One policymaker even
wanted to raise borrowing costs this month.
Few analysts expect rates to go up but they say the prospect
of the central bank holding interest rates at 5 percent for the
rest of the year has increased.
That bodes ill for the housing market and the wider economy.
After a decade-long boom, house prices are coming down fast as a
global credit crunch forces lenders to toughen up terms, making
it all but impossible for many would-be new buyers to get a
The number of properties changing hands has halved from a
year ago and homebuilders have announced thousands of job cuts
A government-sponsored report on Tuesday warned mortgage
markets could remain jammed for years but fell short of making
any recommendations as to what can be done to break the impasse.
The BoE data on Tuesday showed mortgage lending rising by
its weakest amount in nearly 8 years. The overall rise in
secured and unsecured lending was the lowest since 1999 and at a
third of the level seen just a few years back.
British retailers are not expecting any improvement in their
fortunes any time soon. The CBI's expectations balance also hit
a series low.
Highlighting the consumer pain, sweets-to-DVDs retailer
Woolworths WLW.L issued a profit warning on Tuesday, blaming a
marked downturn in trading conditions. It scrapped plans to sell
out of DVD publisher 2 entertain, sending its shares to a new
"The risks of a sharper retrenchment in consumer spending,
highlighted by today's CBI survey, are real, signalling a real
risk that the UK economy could lapse into a mild recession,"
said Matthew Sharratt, economist at Bank of America.
(Additional reporting by Matt Falloon; Editing by Ruth