Tax rise has not dented spending, says CBI

THE Confederation of British Industry said yesterday that there was no sign that April's tax increases had dented high street spending, but the latest CBI survey of retailers suggested that sales had fallen back last month, writes Robert Chote.

Share prices recovered some of the ground they lost on Monday, helped by a steadier performance in the bond market as retail sales fell unexpectedly sharply in the US. The FT-SE index of 100 leading London shares closed 23.3 points above Monday's close at 3,039.6 as institutional investors were tempted to buy.

About 44 per cent of retailers reported that their sales in May were up on a year earlier, compared with 32 per cent who reported that they were lower, the CBI said. This was in line with the surveys for the first three months of the year, but more pessimistic than April's, which may have been distorted by the timing of Easter. The official figures are due tomorrow.

Nigel Whittaker, chairman of the CBI's distributive trades panel, said retailers had reported 'virtual silence' from their customers on the subject of tax increases. But he warned that it would be some time before the full impact of the rises would be clear.

Retail sales in the US fell by 0.2 per cent in May, according to the Commerce Department.

Separate figures from the US Labor Department showed consumer price inflation dropping from 2.4 to 2.3 per cent in May, with consumer prices rising by 0.2 per cent in the month. This was in line with Wall Street forecasts.