January 28, 2020 / 2:42 PM / 19 days ago

UPDATE 1-UK consumers remain cautious as BoE meets on rates

 (Adds economist reaction, background)
    By Andy Bruce
    LONDON, Jan 28 (Reuters) - British retail sales flat-lined
in late December and early January, according to a survey that
showed no change in weak consumer spending ahead of the Bank of
England's finely balanced decision whether to cut interest rates
this week.
    Other recent surveys have pointed to a jump in optimism
among businesses and households after Prime Minister Boris
Johnson's landslide election win last month.             
    But the Confederation of British Industry's monthly retail
sales gauge was steady at zero in January and retailers cut
orders with suppliers as stocks of goods built up.
    "The CBI distributive trades survey pointed to stable,
lacklustre retail sales in January, thereby suggesting that the
decisive general election result failed to give an imminent
boost to consumer spending," said economist Howard Archer of the
EY ITEM Club consultancy.
    Allan Monks, an economist at JP Morgan, said he thought the
BoE's Monetary Policy Committee would not announce a rate cut on
Thursday after the signs of a pickup in confidence, the housing
market and job creation.
    "Most on the MPC will probably have made up their minds by
now. But this is a survey which we think will appeal to the
doves as part of a decision to vote for lower rates," he said.
    There were some hints of an improvement in the CBI's data.
Sales avoided their usual fall in the first month of the year
and for the three months to January, its measure of retail sales
was the strongest in a year.
    But the CBI described the outlook for retailers as tough.
    "A challenging Christmas has extended into the New Year,
with little expectation of any improvement soon," CBI deputy
chief economist Anna Leach said.
    The boss of electronics group Dixons Carphone        said
last week he was not counting on the British consumer market
improving, although the owner of the Primark clothing brand
        said there was too much gloom about the outlook, citing
Britain's sound economic fundamentals.             
    Economists say the BoE is likely to take some comfort from
official data last week which showed stronger-than-expected job
creation in the three months to November. 
    But policymakers are also likely to worry about a drag on
the economy from uncertainty about Britain's chances of striking
a trade deal with the European Union before a deadline at the
end of December.
    Britain is due to leave the EU on Friday when an 11-month,
no-change transition period will begin.
    Economists polled by Reuters expect a 6-3 vote by the MPC to
keep rates at 0.75%. The decision is due to be announced at 1200
GMT on Thursday.
    The CBI survey was based on the responses of 51 retailers
between Dec. 16 and Jan. 14.

 (Reporting by Andy Bruce
Editing by William Schomberg and Giles Elgood)
  
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