Retailers enjoyed a good December, arousing hopes that 1996 will see a return of the "feel-good" factor.
But a new independent forecast based on the Treasury model warned that consumer expenditure would rise in 1996 by 1 per cent less than the Treasury has predicted.
Supported by high levels of discounting, retail sales rose by 4.3 per cent in December on a year ago, according to British Retail Consortium (BRC). This was the strongest increase recorded by the Monitor since April, though below the 4.9 per cent annual increase seen in December 1994. A flurry of trading statements later this week from large retailers such as Dixons, Argos and Storehouse is expected to reinforce the message of strong sales over the Christmas period.
According to the BRC, food and drink and personal computers performed strongly. London stores did particularly well, benefiting from record numbers of visitors from abroad. By contrast, footwear, furniture and carpets and DIY continued to suffer from the low level of turnover in the depressed housing market.
The results were welcomed by James May, BRC director general, as "a good finish to the year". Calling for further reductions in interest rates, Mr May said: "We are reasonably hopeful that with the drop in interest rates and tax cuts, there will be continued recovery in consumer spending in 1996."
However, new figures from the Bank of England showed that the growth in consumer credit fell back in November after the record surge in October. The increase of pounds 613m was about pounds 100m less than the City had predicted, and October's rise was revised down by pounds 40m to pounds 830m. …