British retail sales grew at a faster-than-expected pace last month but put in their weakest quarterly performance in a year, doing little to settle the debate on where UK interest rates are headed next.
The Office for National Statistics said on Monday that sales rose 0.7 percent in March after a downwardly revised 0.3 percent increase in February, putting them up 2.6 percent on the year.
The monthly rise was more than double analysts' forecasts but for the first three months of 2006 as a whole retail sales fell 0.7 percent from the previous three months - the first drop and the weakest outturn since February 2005.
The central bank has been counting on a consumer spending recovery to drive economic growth this year but with the underlying rate of sales growth dipping into negative territory that revival seems far from assured.
Economists expect figures this week to show annual economic growth picked up in the first quarter to 2.2 percent. Chancellor of the Exchequer Gordon Brown forecasts 2006 as a whole will record expansion between 2.0 and 2.5 percent.
Monday brought welcome news on the public finances for Brown, widely seen as Prime Minister Tony Blair's most likely successor. Public sector net borrowing (PSNB) in the fiscal year just past came in only just above the chancellor's budget forecast.
The ONS said full-year PSNB was 37.8 billion compared with Brown's forecast for 37.1 billion made only last month. For March 2006 alone, PSNB was 7.0 billion pounds, as expected.