House prices and retail sales slide

By Christina Fincher and Sumeet Desai

LONDON (Reuters) - House prices fell 1.9 percent this month alone and retail sales dropped at their sharpest pace in at least 25 years, two separate surveys showed on Thursday, adding to the gloom on the economic outlook.

The Nationwide Building Society said nearly 5,000 pounds was wiped off the value of the average home in August, leaving it 10.5 percent cheaper than at the same time last year -- the biggest decline since comparable records began in 1991.

The property market is now plummeting, after 10 years in which prices trebled, as banks hit by the credit crunch have tightened their lending criteria with many now requiring a 25 percent deposit for mortgages.

Its fall is now reverberating across the economy with retailers and construction firms the hardest hit as the economy possibly heads into its first recession since the early 1990s.

The Confederation of British Industry's monthly snapshot of the retail sector showed August was a washout. Sales fell at their sharpest pace since the series began in 1983 and retailers expected to fare little better in September.

"This has been a summer that many retailers would rather forget. The downturn in the housing market is continuing to depress sales for those shops selling big-ticket items," said Andy Clarke, chairman of the CBI's survey panel.

STERLING DOWN

The pound has already been falling sharply on worries over the overall health of the economy and expectations that the Bank of England, which is still worried about inflation, will cut interest rates sharply next year.