Sales growth jumps to 13-year high

Consumers return to the shops with a vengeance

High Street sales staged a comeback in the November pre-Christmas shopping period, taking growth to its highest level for 13 years.

They suggest that the Bank of England's rate cutting strategy is working, they are continuing to keep consumer demand afloat at very buoyant growth rates while the rest of the economy suffers

Richard Iley
ABN Amro

UK retail sales were 7.1% higher last month than in November 2000, the Office for National Statistics said.

The figure, the highest since May 1988, followed stagnation in sales growth in October, when the affects of the terror attacks in the US were blamed for keeping shoppers at home.

It also highlighted the differing fortunes besetting the UK buoyant services sector and recession-hit manufacturers.

A separate survey on Thursday showed that output expectations among factory bosses have fallen to their lowest level for more than three years.

Cold snap

The strong sales figures were credited largely to discounting, and brisk trade at clothes shops as lower temperatures prompted consumers to stock up on winter wear.

Low interest rates also supported demand, said analysts, who had expected sales to rise 0.4% from October, compared with the ONS figure of 1.3%.

"Don't forget interest rates are at a record low," said David Page, an economist at Investec bank.

"The consumer, although very aware of the grim economic outlook on a global basis, is very confident about their own personal finances."

Richard Iley, of ABN Amro, said: "These are very strong data indeed.

"They suggest that the Bank of England's rate cutting strategy is working, they are continuing to keep consumer demand afloat at very buoyant growth rates while the rest of the economy suffers."

Rates dilemma

The figures will intensify the problems facing Bank of England chiefs attempting to keep interest rates at a level sufficiently high to control inflation, but low enough to protect the UK's beleaguered manufacturers.

More than half of UK manufacturers say export orders are at below-trend levels, compared with 12% reporting above-average demand, the Confederation of British Industry said on Thursday.

Stocks of finished goods have risen to their highest level for three years, the CBI said in its latest monthly industrial trends survey.

The stockpile will be seen by economists as an indication of slack demand.

"Today's survey illustrates the length and depth of the recession in manufacturing," Ian McCafferty, the CBI's chief economic adviser, said.

"The outlook remains heavily influenced by the current global weakness."

UK manufacturing is not expected to recover until the second half of next year, he added.