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Retail sales disappointed in July although shoppers appeared to have shrugged off the first wave of terrorist attacks in London, the CBI said yesterday.

The employers? organisation found that 47 per cent of retailers taking part in its distributive trades survey last month said that sales fell, compared with 29 per cent who said they were up.

The balance of minus 18 per cent marked virtually no improvement on June?s minus 19 per cent, when the fall in trading was at its lowest level in the survey?s 22-year history.

The CBI said the figures reflected ?anxiety over the housing market, interest rates and tax increases?. They point to a continued weakness in consumer spending, which has been largely responsible for the current economic slowdown.

The first wave of terrorist attacks, however, had left the ?position of retailers largely unaffected?. The impact of the second, failed attacks would be evident only in its August report.

FootFall, a consultancy, said that visits to high streets and shopping centres across the UK decreased by a relatively small 1.1 per cent between June and July. A decline in central London was offset by stable activity in areas around the capital and in other cities.

The survey came a day before the Bank of England?s rate-setting monetary policy committee holds its monthly meeting.

Sir Digby Jones, director-general of the CBI, yesterday repeated his call for the Bank to cut interest rates in order to maintain economic growth and shore up consumer confidence.

He said: ?The deterioration in retail sales volumes is continuing [and] a marked slowdown in the economy is clear to see. The argument for a ?wait and see? approach is fading fast. It is time for the Bank of England to get off the fence.?

Analysts said the CBI?s survey could play a pivotal role in the MPC?s decision, with members divided at its last meeting on how entrenched the downturn in consumer spending had been.

Financial markets have firmly priced in a 25 basis points cut in interest rates to 4.5 per cent at the MPC?s August meeting, which concludes tomorrow. Although most retailers regarded sales as poor for the time of year and many brought forward their summer sales, there was also a slight improvement in some areas such as the grocery sector, where sales grew strongly.

Sales in the furniture and carpet sector continued to fall rapidly while clothing, confectionery, tobacco and newsagents also saw sales fall at a faster rate than in June. Overall, orders fell at their fastest rate since July 1999 and are expected to fall again in August.

Meanwhile, other data suggested that the construction industry, which accounts for about 5 per cent of the economy, expanded for the 44th consecutive month.

The Chartered Institute of Purchasing and Supply and NTC Research found there was an increase in activity in commercial construction, civil engineering and house building, which recovered to post its best performance in six months.

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