Small dose of Christmas cheer for retailers

Clothes shops were given a pre-Christmas boost today with the news that November sales increased at the fastest rate since August last year.

Fashion outlets enjoyed a 3.6% growth in trading between October and November as cold weather sent shoppers to the high street to buy winter clothes.

The Office for National Statistics said other retailers also benefited as the number of sales across the whole sector increased by 0.7% in November, well ahead of City expectations of 0.3%.

Howard Archer, chief UK economist at Global Insight, said he was sceptical consumer spending would see a marked and sustained improvement, but that the November rise reduced the case for an interest rate cut.

"Overall sales were lifted in November by a large jump in clothing and footwear shops which would have been boosted by the markedly colder weather. Also it may be that some consumers have decided to open their wallets a bit more for Christmas after limiting their purchases over much of 2005," he said.

"We suspect that the upside for consumer spending will remain limited for some time to come."

The ONS said November's figures showed "a continuation of the pick-up seen in recent months", which saw month-on-month sales up 0.6% in September and 0.4% in October.

The total volume of sales in November was 2.1% higher than in the same period last year.

Over the three months from September to November, sales were up 1% on the previous three months, again the highest rise since August last year.

And compared with the same period a year ago, sales were up 1.3%, with trading volumes 2.4% higher at food stores, 1% higher at non-food stores, and 3.1% higher at clothing stores.

But there was a decrease of 1.3% for household goods stores and 2.9% for non-store retailing where lower sales by catalogue companies outweighed increases online.

The ONS survey was the latest to be published in recent weeks. The British Retail Consortium said like-for-like sales rose in November for the first time in eight months, although the CBI distributive trades index slipped to minus 35 in the month from minus 18 in October.

Jonathan Said, economist at Centre for Economics and Business Research, said this was a "blip" which was likely to recover in December.

"All in all, it looks as though consumers, who have been saving more over the last year, are now spending a bit more than they did over the summer and last Christmas," he said.

Mr Said added that the figures supported the Bank of England's expectation of an improvement in the economy.

ING analyst James Knightley said: "The ONS states that this report adds to the evidence that the retail sector is continuing to pick up, but growth remains well below the levels seen in recent years and much of the strength continues to be helped by aggressive discounting.

"In an environment of rising unemployment and weak consumer confidence, we do not expect to see much further improvement in growth rates."