Retail sales better than expected

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Retail sales volumes fell 0.2% in April compared to March, official figures showed, their first successive monthly drop for more than two years.

Food and DIY stores were worst hit, with the latter's sector suffering its biggest quarterly sales drop for three years. But booming sales of computer games, such as the latest Grand Theft Auto release and Nintendo's Wii Fit console, helped limit the retailing pain.

Economists had been expecting a bigger overall fall from the Office for National Statistics, in line with recent gloomy trade surveys. They warned high street sales would have to worsen considerably before the Bank of England's Monetary Policy Committee (MPC) considered making a rate cut.

Vicky Redwood, UK economist at Capital Economics, said April's fall was "modest" and pointed to the "extremely healthy" annual sales growth rate of 4.2%. This was much better than the 1% rise flagged up by the British Retail Consortium this month.

Ms Redwood said: "The MPC thinks that a high street slowdown is required to keep a lid on price pressures. So unless sales growth really starts to tank, we are going to have wait a while for the next interest rate cut."

Retail sales volumes during the three months between February and April were up 1.5%, a slight drop from the 1.9% seen in March.

There was evidence that a slowing housing market was dragging on sales growth after household goods stores, including DIY shops, suffered a 1.9% sales drop. This was the biggest fall for three years.

The best performing sector by far was "other stores", which includes entertainment shops such as Zavvi and HMV. They enjoyed 5.3% sales growth in the past quarter, the biggest rise since records began in 1986.

Howard Archer, chief UK economist at Global Insight, said the 1.5% overall rise was "hard to believe".