Little rebound for UK retailers after 'Beast from the East' - CBI

By David Milliken

LONDON (Reuters) - British retailers reported slower-than-expected sales growth in the first part of April, industry figures showed on Thursday, raising the possibility that a big decline in March was due to more than just severe weather.

The Confederation of British Industry said its April sales volume balance rose to -2 from March's five-month low of -8, below the average forecast of +5 in a Reuters poll of analysts.

"Sales have continued to disappoint in April after falling in March. But expectations for next month are looking a little healthier," CBI economist Anna Leach said.

Retailers expect the sales balance to rebound to +25 next month - though this forward-looking measure had failed to anticipate the weakness seen in March and April.

Clothing and furniture stores have done worst this month, with grocers and DIY stores are doing better, the CBI said.

Several major British retailers have faced financial trouble in recent months, as consumers tightened their purse-strings in response to higher inflation following 2016's Brexit vote.

"Much of this reflects ongoing structural changes in the sector as well as the continued squeeze on households' real incomes," Leach said. "While conditions have improved for households recently ... we expect further gains in living standards to remain modest."

The Bank of England has forecast that quarterly economic growth data due on Friday will slow to 0.3 percent from 0.4 percent in the fourth quarter of 2017, in large part due to snow storms dubbed "the Beast from the East".

But if the economy fails to rebound rapidly, that raises the prospect of underlying weakness, reducing the likelihood that the BoE will raise interest rates next month, as financial markets had previously expected.

"Following (BoE Governor) Mark Carney's recent dovish comments, the CBI survey will likely fuel suspicion that the Bank of England will hold off from raising interest rates at the May MPC meeting," said Howard Archer, chief economic adviser at consultants EY ITEM Club.

April factory orders data from the CBI, released on Tuesday, were also weaker than expected but relatively solid by historic standards.

Data on mortgage approvals and car manufacturing, released earlier on Thursday, painted a subdued picture for March. Businesses did, however, report offering more generous pay settlements than before.

The CBI data were collected from 52 retail chains from March 28 to April 13.

(Reporting by David Milliken; Editing by Gareth Jones)