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Strong growth in UK retail sales before Christmas

Thu, 15 Dec 2005

British retail sales rose at their sharpest rate in five months during November, in a further sign that consumer demand is picking up and boding well for the key Christmas shopping season, official figures have shown.

The Office for National Statistics (ONS) said today that sales grew 0.7% last month, more than double the rate expected, after a rise of 0.4% in October which took the annual rate to 2.1%.

The figures are likely to dent expectations of further Bank of England interest rate cuts, although this will point to evidence that retailers still have to cut prices aggressively. Prices on average were 1.1% lower than a year earlier.

The increase was driven by a big rise in clothing and footwear sales. Their sales increased by 3.6%, the highest monthly increase in more than a year, perhaps as temperatures dived after a relatively mild October.

Jonathan Loynes, economist at Capital Economics said, "November’s UK retail figures suggest that high street spending in the early run-up to Christmas has got off to a very healthy start."

The three-monthly rate, which the ONS sees as a better gauge of the trend, picked up to its sharpest rate since August 2004. Statisticians said this indicated a continuation of the pick-up seen over recent months.

Bank of England policymakers have also been forecasting a recovery in consumer spending after a sharp slowdown at the start of the year. They left interest rates at 4.5% last week and have indicated they are in no hurry to move them until they have more data on the Christmas shopping period and New Year wage round.