Retail spending grows

HIGH street spending growth was stronger in the year to February than at any time since the year to last April, according to the latest Confederation of British Industry survey. But the CBI warned that it was too early to conclude that the rise in consumer spending would be sustained.

The survey also showed a sharp drop in the number of retailers who expect to increase their prices this month, despite the boost to import prices from sterling's devaluation. But the number of wholesalers expecting to raise prices jumped dramatically, suggesting growing pressure on retailers' profit margins.

Some 46 per cent of retailers reported that they sold more last month than a year ago, compared with 27 per cent reporting a fall in sales. The unexpectedly sharp improvement in sales from January allowed retailers to run down stocks, as their orders from suppliers were little changed.

'Although the improvement in retail sales since just before Christmas provides grounds for cautious optimism, it may also reflect the heavy discounting which has taken place in the new year,' said Nigel Whittaker, chairman of the CBI distributive trades panel.

Ian Shepherdson, economist at Midland Global Markets, said the relationship between the CBI survey and official retail sales figures in recent months would suggest a rise of 1.5 per cent in official retail sales volume in February. But Mr Shepherdson said this was likely to prove over-optimistic, although there should still be a month-on- month rise. Michael Saunders, of Salomon Brothers, said he expected sales volume to be unchanged on the month.

A 39 per cent balance of retailers said they hoped to increase their prices in March, down from 50 per cent in December. This is the lowest figure since the survey began a decade ago. But the balance of wholesalers expecting to raise prices rose from 6 to 66 per cent in the same period.

Wholesalers saw a year-on-year fall in sales volume in February, following a rise in January. They sharply cut back orders from their suppliers and expect March sales to be unchanged on a year ago.