Retail sales surge while CBI says industry 'past the worst'

The economy is firing on both cylinders with retail sales rebounding sharply and manufacturing embracing the future with optimism, new figures showed yesterday.

The economy is firing on both cylinders with retail sales rebounding sharply and manufacturing embracing the future with optimism, new figures showed yesterday.

Shoppers returned to the high street with a vengeance last month after a weak Christmas, as sales volumes grew at their fastest for more than two years.

Meanwhile the employers' group the CBI said manufacturing was "past the worst" as companies' confidence about their own prospects rose again.

Retail sales surged 1.5 per cent in February, the strongest growth since January 2000, official figures showed. The growth was driven by the non-food sector and, in particular by clothes, household goods and catalogue shopping. Mail orders surged almost 14 per cent. Anecdotal evidence indicated a jump in sales of memorabilia for the Queen's golden jubilee.

Analysts said it helped explain the shock falls in December and January, which were contradicted by surveys from the CBI and British Retail Consortium. The data had also failed to mesh with firm confidence, rising unemployment, heavy borrowing and a rampant housing market.

"These figures are likely to dispel the notion consumer spending might be slowing quite quickly," said Michael Hume at Lehman Brothers. "Indeed they question whether it is slowing at all."

The strength of the housing market was highlighted by Inland Revenue figures showing the number of "particulars delivered" forms – a measure of house sales – rose 6 per cent in February, which Lehmans said pointed to price inflation "in the mid-teens".

The CBI said the number of manufacturers expecting output to improve over the next four months outnumbered those expecting a decline by 2 per cent, the most positive margin since July 2001.

"While we are probably now past the worst, the recovery in manufacturing is still likely to be only gradual," the CBI's Ian McCafferty said.