Gloom returns to high street as sales drop

THE STEADY rise in high street spending since the summer may have stalled, official retail sales figures for November will suggest today. This mirrors yesterday's distributive trades survey from the Confederation of British Industry, which showed a slide in high street spending last month.

The gloomy news from the high street will disappoint retailers hoping for a good Christmas, and contrasts with yesterday's announcement of a 0.3 per cent rise in factory output in October, unexpected by both the City and the Treasury. Factory output was up on the same period a year earlier for the first time in 26 months.

October's rise in manufacturing output was the first for four months, but economists warn that it may not last. Sterling's devaluation triggered a rise in the amount of chemicals produced for export while the electrical engineering industry also stepped up production.

Manufacturing output in the three months to October was slightly down on the previous three months, but has been roughly flat since February. Energy output rose by 8.6 per cent in the past three months, helping to take industrial production to a 15- month high. Production of consumer goods was down in the same period, reflecting a blip in car production and lower output of food, drink and tobacco. But higher output of electrical components has boosted the investment goods sector, suggesting that manufacturers may be getting ready for recovery.

However, Robert Lind, of UBS Phillips & Drew, warned that 'recession is not yet over in the manufacturing sector'. He expects factory output to resume its fall as manufacturers meet higher demand from the storeroom shelf.

The Treasury said the factory output figures were 'clearly welcome'. But ministers are braced for disappointing retail sales and unemployment figures during the rest of the week.

The November retail sales figures will end a three-month run of rising volume. It is too early to tell if the underlying trend of gradual improvement has stopped.

The CBI survey has shown a consistently more pessimistic picture than official data, with sales reported to be lower than a year earlier in five of the past six months. Some 43 per cent of retailers told the CBI that their sales were below last year's levels in November, compared with 34 per cent reporting that sales were up. The 9 per cent balance reporting a year-on-year sales fall was twice the figure for October and the gloomiest report since August.

Retailers expect sales in December to be little different from last year. 'With several shopping days left to Christmas, it is still an open question whether last year's levels will be exceeded,' said Nigel Whittaker, chairman of the CBI's distributive trades panel.

Twice as many retailers reported that they ordered fewer goods from their suppliers last month than a year ago than reported that orders were up. A seven-to-one majority reported that sales were bad for the time of year, a much higher number than in the previous three months.

Mr Whittaker said that 'conditions appear to be in place for a modest upturn in consumer demand in the new year'.