November figures show `recovery is shifting up a gear'

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The Independent Online
YESTERDAY BROUGHT fresh signs of growing strength in both consumer spending and industrial output in the run-up to Christmas.

Retail sales rose by 0.2 per cent in November, according to official figures. This was a lower level than some economists had expected but the trend for year-on-year growth in the three months to November climbed to 4.2 per cent, its highest for a year.

November's increase also made the run of seven consecutive rises in sales volumes, the longest since this recovery started in mid-1992.

The figures also suggested that prices might have started to increase. The cash value of sales outpaced volume growth for the second month this year.

"The trend remains strong enough for prices on the high street to have stopped declining," said Geoffrey Dicks of Greenwich NatWest.

The volume of sales of household goods items was by far the strongest in the year to November, up 9.3 per cent. Food sales are the weakest, up just 2.1 per cent year-on-year. The volume of sales in clothing and footwear, where prices have been falling steeply, was running at 4 per cent in the year to November.

Separately, the Confederation of British Industry said manufacturers' export orders had jumped to their highest level for two and a half years. The survey indicated prices were still falling at the factory gate but suggested that this month, more companies expected to be able to push through price increases.

"This survey provides the clearest sign to date that the manufacturing recovery may be shifting up a gear," said Dharshini David of HSBC.

The balance of companies expecting output to rise (rather than fall) climbed to 14 per cent from 6 per cent. The rebound in export demand, despite the strong pound, is driving these optimistic expectations, with the balance rising from minus 33 per cent to minus 27 per cent, the best since June 1997.

"The improvement in export demand compared with earlier in the year has been helped by a reviving world economy and more favourable economic conditions in Euroland," said Sudhir Junankar, the CBI's economist. He added that the strength of sterling was still handicapping exporters.

The Engineering Employers' Federation yesterday emphasised the absence of inflationary pressures in industry. Pay settlements in engineering edged down to 2.4 per cent in the three months to November, from 2.5 per cent, according to its latest pay bulletin.

"The latest figures continue to illustrate the historically low level of engineering settlements and the engineering sector's responsible attitude towards controlling its internal costs in the face of the continuing strength of the pound," the bulletin concluded.