Sales down, inflation up

A slowdown in the rate of retail sales but a sharp increase in inflation are expected to be two main ingredients of a busy week for economics news. A slowdown in the rate of retail sales but a sharp increase in inflation are expected to be two main ingredients of a busy week for economics news. However, there should be good news on the labour front on Wednesday. Unemployment should fall by another 40,000, to below 2.4m, while unit wage costs should fall and ernings growth continue at 4.75 per cent a year. Last week's slump in commodities markets came too late to have an impact on producer prices. Figures due tomorrow should show an unadjusted 0.8 per cent increase for January, taking the annual increase up to 10.5 per cent. That will pump into retail prices over the next few months. Meanwhile, January's Retail Prices Index may take the annual rise up from 2.9 per cent to 3.5 per cent. This will be partly caused by the 0.4 per cent fall in January 1994 dropping out of the calculations, while this time interest rates have been rising, seasonal foods are dearer, and Budget duty increases in tobacco, alcohol and petrol have taken effect. But while the weather has cut food supplies, it has left a glut of coats, scarves and gloves on shop shelves, chopping the annual increase in sales volumes from 3.8 per cent to 2.6 per cent last month. But this is a regular drop in activity after the Christmas rush: underlying growth is reckoned to have held steady at 3 per cent. January is traditionally a good month for the government's tax revenues, as that is when many companies and self-employed people pay income and corporation tax. The Public Sector Borrowing Requirement is expected to have fallen by £3.5bn during the month, nearly double the figure a year ago, with the help of £100,000 from privatisation. According to Geoffrey Dicks and David Hillier, the economists at NatWest Securities, the broad M4 version of money supply should have risen by 0.4 per cent in January, keeping annual growth unchanged at 4.5 per cent. But weekly notes and coin returns suggest that M0, the narrower definition, was flat and took the annual growth down from 6.8 per cent to 6.4 per cent. This is its lowest since August, but still outside the government's 1-4 per cent target range.

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