The Confederation of British Industry said that 31 percent of 100 retailers surveyed sold fewer goods than a year earlier, and 30 percent sold more. The rounded balance of zero was up from a 22-year low of minus 35 points in November, the biggest increase since April 1995 and better than stores' expectations.

``Retailers have been pinning their hopes on Christmas bringing some festive cheer after months of depressed trading, and these figures are better than expected,'' John Longworth, chairman of the CBI distributive trades survey panel, said in a statement. ``They reflect the efforts made to entice customers back into shops, but the question is at what cost as prices are so heavily discounted.''

Europe's second-biggest economy is heading for its slowest growth in 13 years after consumer spending faltered, hurting sales at retailers such as Wal-Mart Stores Inc.'s Asda and Kesa Electricals Plc. Government figures showing retail sales rising since July represent ``tentative signs of a modest pick-up'' in consumer spending, the Bank of England said today.

The CBI, the country's biggest employers' group, said retailers resorted to ``aggressive price discounting and bulk-buy offers'' to attract customers and that's squeezing profit margins.

Some retailers take as much as much as 40 percent of their annual revenue between November and January. Shoppers spend 10 billion pounds ($17.6 billion) more money in December than in any other month, according to the British Retail Consortium, which represents 80 percent of retailers.

Above Expectations

Retailers had expected only a modest recovery in December, with a net balance of 23 percentage points expecting lower sales than last December. The balance of expectations for January improved to minus 9, according to survey, which was carried in the first two weeks of December. Sales for the time of year improved to minus 11 from minus 31 in November.

The three-month sales index, favored by some economists as it smoothes out monthly fluctuations, rose to minus 18 from minus 26, the CBI said.

``The underlying picture that seems to be emerging is that consumer spending will be reasonably healthy over the Christmas period,'' said Howard Archer, chief European economist at GlobalInsight Inc. in London. ``If borne out by hard data, this dilutes the case for an interest rate cut early in the New Year.''

Interest Rates

The pound fell and bonds rose today as investors increased bets the Bank of England may lower rates next year after Monetary Policy Committee member Stephen Nickell voted for a cut in interest rates this month, the first to support a reduction since August.

The pound fell against the dollar to $1.7514 as of 2:10 p.m in London from $1.7552 before the central bank minutes were released. The implied rate on the interest-rate future maturing in June fell 3 basis points to 4.47 percent. A basis point is 0.01 percentage point.

Christmas is ``going to be good, not great,'' Asda Chief Executive Andy Bond said Dec. 13. The Leeds, England-based retail group has missed all its quarterly profit and sales goals this year and plans to cut prices to win back customers from market leader Tesco Plc.

John Lewis Partnership, the U.K.'s largest department-store company, said Dec. 15 that sales in the week ended Dec. 10 rose 7.1 percent from a year earlier to a record 84.1 million pounds as consumers bought Internet music players, radio controlled models and cashmere sweaters as holiday gifts.

The CBI report has proved a poor guide to government data on retail sales, which rose 0.7 percent in November from October, the fourth straight increase and the biggest since June. On Dec. 6 the BRC said November sales rose for the first time in eight months.