Britons seen buying more as consumer gloom lifts

LONDON (Reuters) - British retailers reported the best outlook for sales in more than a year on Thursday and consumer confidence picked up strongly, raising tentative hopes of better times ahead for an economy in a renewed slump.

A surprise contraction in economic output in the first three months of 2012, revealed by the Office for National Statistics (ONS) a day earlier, officially put Britain into its second recession since the financial crisis and re-ignited a debate over the need for more monetary stimulus.

The drop in GDP seemed to have caused a member of the Bank of England's Monetary Policy Committee to rethink his position.

Martin Weale said in March he did not see a case for further quantitative easing and expressed concerns over persistently high inflation, in an interview on Thursday he said the weak GDP figures strengthened the case for more QE.

Most economists doubt the Bank of England will extend its asset-purchase programme in May when the current round ends.

"There have been a number of surveys released in the last 24 hours which tend to support the view that the UK economy is not quite in such a parlous state as the ONS data would suggest," said David Tinsley of BNP Paribas.

"For now, the MPC is likely to continue to believe the pace of the economy is firmer than the GDP statistics would suggest, and the attendant inflationary risks are therefore greater."

The BoE forecast in February that inflation would fall below its 2 percent target later this year from September's peak of 5.2 percent. Whether it will fall that quickly is in question after inflation rose in March for the first time since September to stand at 3.5 percent.

Britons' expectations for inflation a year from now rose to 3 percent and forecasts for longer-term inflation also increased, according to the April YouGov/Citi survey.

A fall in inflation later this year may help retail sales grow, said Judith McKenna, who chairs the distributive trades survey panel at the Confederation of British Industry.

The CBI poll showed that the balance of expected retail sales for May rose sharply to +19, its highest since February 2011. Sales volumes dropped in April from a year earlier, but at that time they had been boosted by a royal wedding and good weather.

Retailers should also benefit from recovering consumer morale. It rose in March to its highest level in nine months as Britons became less worried about jobs, according to a survey by lender Nationwide.

And a separate survey by the European Commission showed that overall economic sentiment among businesses and consumers in Britain improved to the highest level since last July, although the consumer confidence component weakened.

News from some companies also pointed to cheerier consumers. Whitbread said that since the start of its new business year sales at both its Premier Inn hotels and restaurant business had grown at outlets open for more than a year.

However, shoppers remain jittery, not least due to a weak housing market - once a bedrock of consumer wealth. The British Bankers' Association said mortgage approvals for house purchase fell to their lowest in almost a year in March.

(Editing by Robin Pomeroy)