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British retail sales unexpectedly rise in Nov

Retail sales rose 0.3 percent from October to November, the Office for National Statistics revealed Thursday, suggesting consumers are continuing to spend in the run-up to Christmas despite rising unemployment and mounting fears about the economy.

Analysts were anticipating a 0.6 percent decline after a raft of bad anecdotal and survey evidence during the month, notably from general retailer Woolworths, which will likely be closed down for good by its administrators in the first week of January.

The statistics office said the rise was driven by an increase in sales at household goods stores and non-store retail and repair shops. Internet sales were strong too.

Vicky Redwood, economist at Capital Economics, said massive discounting may be keeping consumers spending but thinks the official figures are ‘hard to take seriously’ given that other measures of retail spending suggest there has been a retrenchment. The official figures have been criticized in recent months for being too upbeat.

‘We still think that Christmas will be pretty awful for retailers and that things will get even worse next year,’ Redwood said.

In a separate report, the Council of Mortgage Lenders (CML) highlighted the problems facing British households when it said net mortgage lending may actually turn negative despite recent sharp rate reductions from the Bank of England.

By the end of 2008, the CML said it expects 210,000 households to be more than three months in arrears in their mortgage payments and that this could increase to 500,000 by the end of 2009.

Public finances data was likewise bleak, with government borrowing hitting a record in November amid rising unemployment and social benefits and lower tax receipts, the Office for National Statistics said.

It said public sector net borrowing, the government’s preferred measure of the public finances, rose to 16 billion pounds ($24.8 billion) in November, 3 billion pounds more than May 2008’s 13 billion, which was the previous record since monthly records began in 1993.

The increase in the deficit pushed net debt up to 650 billion pounds, or 44.2 percent of annual gross domestic product. The debt ratio was last higher in March 1985.

The government has admitted that the state of the public finances will get worse in the years to come as it tries to make the recession shorter and less acute through a variety of fiscal measures.

In his pre-budget report last month, Britain’s finance chief Alistair Darling said borrowing will likely hit a staggering 118 billion pounds in 2009/10 - a record 8 percent of gross domestic product and up from 78 billion pounds in 2008/9.