City economists said the evidence of subdued selling prices pointed to another good headline inflation figure today, which could encourage the Chancellor to cut borrowing costs before the end of the year or early in 1994.
Reaction in the financial markets was muted, partly because of threats to Germany and Japan by Vladimir Zhirinovsky, the leader of Russia's newly ascendant right-wing Liberal Democrats. Share prices ended slightly lower while gilts fell in sympathy with German government bonds.
The CBI's November distributive trades survey showed a smaller balance of retailers reporting higher sales than a year earlier than in any month since May. Economists at Midland Global Markets said this suggested that today's official retail sales figure for November could show a fall of around 0.3 per cent in sales volume on the month.
Nigel Whittaker, chairman of the CBI distributive trades panel, said anecdotal evidence suggested that the Budget had had no effect on people's spending. He said shoppers were holding fire until close to Christmas to pick up bargains.
'Volume growth is expected to pick up in December,' he said. 'However, there is a need for caution as recent expectations have not been fully realised.'
Sales growth slowed from October, but retailers ordered more from their suppliers despite having high stocks of unsold goods. Optimism among retailers rose less quickly than at any time since February.
The survey also showed that retailers were planning their biggest increase in investment for six years. Mr Whittaker said this appeared to be in response to greater competition between store groups rather than a desire to increase capacity to cope with higher demand.
Retail sales in the US rose, by 0.4 per cent, for the eighth month in succession in November, providing more evidence of strong growth in the fourth quarter. But analysts worry that the momentum might not carry into the new year and sustain faster growth next year.
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