Higher taxes place brake on spending: CBI survey suggests consumer caution may have caused sales to sag in March

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HIGH street spending grew much less strongly than expected last month, suggesting consumers held back in the face of impending tax increases.

The latest distributive trades survey from the Confederation of British Industry showed sales in March were only modestly up on last year and much lower than expected.

The survey suggests consumer caution has persisted into this month. Retailers predict an equally modest increase in April sales over a year earlier - the weakest expectation reported since February 1993.

Official retail sales figures for March, due on Thursday, are expected to show sales volumes rising by 0.3 per cent.

Nigel Whittaker, chairman of the CBI's survey panel, said the modest growth in retail sales in March was possibly a further indicator of the uncertainty facing consumers. Retailers had now taken a more sombre view of the future and revised down their expectations for sales growth in April to reflect the moderate increases recorded since the turn of the year, he added.

The best sales were registered by booksellers, stationers, grocers and confectioners. Household goods were mixed but durable goods were markedly up. Sales of furniture, carpets, hardware, china and do-it- yourself goods fell.

A rise in stocks relative to expected sales suggested orders placed by retailers could slow further in the months ahead, the CBI said.

However, wholesalers' sales volumes grew at their strongest rate since October and sales in the year to March were reported as being above normal by the largest number of firms since May 1989.

The CBI said that despite the modest outlook for retailers, sales volumes by wholesalers were expected to expand sharply in April against a year earlier.

The strongest growth was reported by wholesalers of electrical installation and agricultural materials. But all wholesaling sectors registered rising sales volumes.

Motor traders meanwhile reported a modest rise in sales in the year to March, but this was well below levels reached in January and February. A further small increase is expected in April, the CBI said.

The cost of goods and services has risen by considerably more than official measures of inflation, the Reward Group pay consultants report, writes Barrie Clement.

While the Government's figure for the underlying rate of annual inflation now stands at 2.4 per cent, Reward calculates the cost of goods and services has gone up by 3.7 per cent.

The largest rises have been in the price of drink, up 15 per cent, and tobacco which has risen 11.5 per cent, Reward found in a survey of 98 British towns and cities. Researchers estimated that house prices had gone up by 2.5 per cent.

Reward reports a 'dramatic' change in one of its key cost of living measure. In the 12 months to last February required 'incomes' - the amount of pay needed to cover a wide range of outgoings including housing costs - had actually decreased by 5.1 per cent. In the year to this February, however, they have gone up by 2.8 per cent.