Retail sales rebound after sluggish September
Thursday 20 November 1997
New figures showing a big bounce in retail sales volumes last month, after a September depressed by the funeral of Diana, Princess of Wales, set alarm bells ringing yesterday over interest rate prospects. Sales growth of 6.4 per cent in the year to October was close to the July 1988 record.
The scale of the rebound took City analysts by surprise. Most now expect the Bank's Monetary Policy Committee (MPC) will increase interest rates at least one more time.
However, any increase is likely to occur after Christmas. Adam Cole, an economist at James Capel, said: "The Bank is forecasting a sharp slowdown in growth in the new year. It will need to be proved wrong before it can justify another interest rate rise."
The MPC will have little fresh evidence before its December meeting and can therefore avoid playing Scrooge. The most important statistics due in the next two weeks will be today's figures for broad money growth, which the Bank has said it wants to see slowing down.
Although retail sales were far more buoyant than expected, some economists found signs of a weaker trend than during the summer. The distribution of free shares in the building societies converting to banks boosted volumes in June, July and August.
The Office for National Statistics said there was some evidence that the pace of activity on the high street was slowing, despite the 2.8 per cent surge in volumes during the month.
Adjusting for September's dip, the three-month growth rate had slowed from 1.3 per cent to 1 per cent in October.
Spending on items such as furniture and electrical goods continued to expand at a very rapid rate. Clothing and footwear sales were also particularly strong last month.
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