Revival in high street spending peters out

THE recent revival in high street spending may be running out of steam as the crucial Christmas trading period approaches, official figures suggested yesterday. Retail sales volume fell by 0.1 per cent in November, dashing City hopes of a fourth successive monthly rise.

The British Retail Consortium, the shops' and stores' trading association, said that 'whilst retailers are cautiously optimistic for a reasonable Christmas, any significant improvement in retail sales is not expected until well into the new year'.

The Treasury said it was too early to conclude that the gradual revival in spending had been halted. Sales volume in the three months to November was 0.7 per cent higher than in the previous three months and at its highest level since the beginning of the recession.

Barclays Bank injected a note of hope by reporting that spending on its Barclaycard credit card in the first two weeks of December was 7.5 per cent higher than in 1991, implying a rise in sales volume of about 4 per cent.

The fall was dominated by a 2.5 per cent drop in clothing and footwear sales and a 1.8 per cent drop in sales of 'other non- foods', including specialist shops such as tobacconists and booksellers. Clothing sales were hit by warmer weather.

Food sales were up by 0.2 per cent in November, a slower rate of improvement than in the previous two months. Department store sales volumes rose 0.5 per cent, although stores in London continued to face difficult trading conditions. Sales of household goods rose by 0.7 per cent to their highest level since August.

The retail sales figures were in line with Tuesday's distributive trades survey from the Confederation of British Industry, which showed a deterioration in sales between October and November.

Some economists fear that an upturn in consumer spending next year could be choked off if the Government tackles its ballooning borrowing by raising taxes. The Government borrowed pounds 2.2bn in November to meet the shortfall between what it spends and raises in taxes. This was nearly 10 times the figure for the previous November and higher than City forecasts.

Government receipts rose by 2 per cent in the year to November, while spending increased by 13 per cent. The recession has hit tax receipts and increased the spending on benefits.

The public sector borrowing requirement for the first eight months of the financial year totals pounds 22.3bn, which the Treasury says is consistent with the pounds 37bn Autumn Statement forecast for the whole year. Excluding privatisation proceeds, the cumulative PSBR has reached pounds 27.2bn.

The figures had little impact on the markets. The French franc remained under pressure in the European exchange rate mechanism. A number of French banks raised their base rates to 10 per cent, following recent increases in money market rates, to defend the currency.