Sterling rose by half a point to 81.2 per cent of its 1985 value against a basket of other currencies. The pound gained more than three cents to close at dollars 1.5780 and rose two thirds of a pfennig to end at DM2.4936.
Exports to countries outside the EC rose 6 per cent in March to pounds 4.7bn. Combined with a small fall in imports, this left a visible trade deficit of pounds 918m, down from pounds 1.25bn in February and the smallest since October. EC trade figures are delayed because of the abolition of customs declarations in the single market.
Import and export volumes are now rising at a trend rate of about 1 per cent a month, excluding oil and erratic items. Economists were concerned that exporters were using the gains to competitiveness from sterling's devaluation to lift prices rather than to capture market share. This is particularly true of manufacturers.
Retail sales volume rose by an unexpectedly sharp 0.5 per cent between February and March to hit a new record level. Sales in the past three months were 1.6 per cent up on the preceding three months, the sharpest trend rate of increase since the summer of 1988. Economists said the surge reflected substantial price discounts in the new year sales.
Spending volume has been accelerating gradually since the beginning of last year. In the past three months food sales volume has risen 1.2 per cent while department store sales have fallen by 0.3 per cent.
Clothing sales were up by 1.2 per cent and household goods sales up by 2 per cent. The British Retail Consortium said sales of furniture and other items that people buy most often when they move house had picked up, reflecting signs of revival in house sales. The BRC added that sales so far in April remained strong.
The buoyancy of high street trade contrasted with figures showing a record pounds 1.2bn fall in bank and building society lending in March, following a pounds 700m rise in lending in February. The growth of the broad money supply measure M4 - cash plus bank and building society accounts - accelerated from 3.3 to 3.6 per cent in the year to March.
Simon Briscoe, economist at Midland Global Markets, said the figures - which were distorted by overzealous seasonal adjustment and the effect of lower interest rates - suggested that the recovery would be 'cash-led rather than credit-led'.
The Treasury said the bank lending figures appeared to have been depressed by March's unexpectedly large public sector borrowing requirement, which pumped money into the economy and allowed people to pay off debt or borrow less.
Building societies committed themselves to lend pounds 3.1bn in March for mortgages - double January's figure. But this is less than the level of last March. Lending commitments for the first quarter are also down on first-quarter lending last year.
Mark Boleat, director-general of the Building Societies Association, said: 'The continued report of increases in activity by estate agents and builders, allied with an improvement in the wider economy, suggest that lending activity will continue to increase in the months ahead.'Reuse content