Interest rate rises not 'significantly' dampening consumer confidence

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Interest rate rises not 'significantly' dampening consumer confidence

Thu 24th May 2007

Interest rate rises have not had a significant impact on consumer spending so far, a new study shows.

Figures published by the BRC-KPMG Retails Sales Monitor indicate that retail sales in the UK were up 2.4 per cent in April on a like-for-like basis.

The three-month trend rate of growth fell to 3.3 per cent from 3.5 per cent in March and to 5.5 per cent from 3.5 per cent in terms of total sales during the quarter.

According to Vicky Redwood, UK economist at Capital Economics, although there has been a "softening" in consumer confidence following a number of rate hikes since August 2006, consumer confidence has not deteriorated rapidly.

However, she speculated that a further interest rate from the current base rate of 5.50 per cent could have a "wider impact" on areas such as the housing market.

"If rates take some of the steam out of the housing market, then that should remove the support for spending as well," she commented.