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Computer games curb retail sales fall

LONDON (Reuters) - A rush to buy a computer game that simulates stealing cars helped to stop British retail sales falling as much as forecast last month, but economists say the outlook for consumer spending is gloomy.

A man plays a PlayStation 3 video game at an electronics shop in Tokyo April 13, 2007. REUTERS/Kim Kyung-Hoon

Sales of the controversial Grand Theft Auto 4 and fitness game Wii Fit partly offset weak food and home improvement sales to give a second small monthly fall in overall sales volumes, the Office for National Statistics said on Thursday.

Retail sales fell 0.2 percent in volume in April, after falling by the same amount in March -- the first consecutive monthly decrease since January 2006. Analysts had predicted a 0.5 percent decline for April.

This brought the annual increase down to 4.2 percent from an upwardly revised 4.7 percent in March.

“Did video games save the day?” said Matthew Sharratt, a Bank of America economist. “Spending on the high street is slowing but continues to show a surprising degree of resilience.”

Grand Theft Auto 4 broke records for a computer game on its first day in the shops at the end of April, shifting more than 600,000 copies worth 25 million pounds.

The previous record holder had been its predecessor, Grand Theft Auto: San Andreas, released in 2004.

Wii Fit, where players simulate exercise with their Nintendo Wii games console, sold 240,000 in its first two days, generating about 17 million pounds.

The average value of weekly overall retail sales for April was 5 billion pounds, the ONS said, up nearly 2 percent on a year ago.

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Policymakers at the Bank of England expect consumer spending to weaken, perhaps sharply, this year as the impact of the credit crunch spreads out from the hard-hit financial sector.

And consumers are unlikely to get any respite from lower borrowing costs this year, after a shock spike in inflation in April to 3 percent which could yet get much worse.

SOARING BILLS

Households are struggling to contend with soaring energy and food bills, muted pay rises and rising mortgage rates, cutting back on the cash they have free to spend in the shops.

Those tight conditions are also ramping up political pressure on embattled Prime Minister Gordon Brown, whose Labour party faces a real risk of defeat to the resurgent Conservatives in the next election due by May 2010.

A contest for a parliamentary seat in the northern town of Crewe on Thursday, brought on by the death of the Labour representative, will give an indication of the public mood, just weeks after Labour suffered big losses in regional elections.

“Last week I spent 38 pounds on groceries, that includes milk and bread,” said Patrick Sutton, a 60-year-old retired coal deliverer. “For the same shopping basket this week it was 42 pounds.”

The ONS revised the March retail sales volume data to show a monthly fall of 0.2 percent instead of the 0.4 percent decline first reported. Official data has been surprisingly strong compared with most other surveys and anecdotal evidence from retailers.

But BNP Paribas economist Alan Clarke said there was plenty more downside for retail sales growth over the coming months.

“However, it is becoming questionable whether this comes soon enough and severely enough to provoke further (interest) rate cuts before winter.”

Additional reporting by Katherine Baldwin in Crewe, Editing by David Clarke, David Christian-Edwards

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