BANK of England governor Mervyn King yesterday delivered the encouraging message to businesses that the outlook for consumer spending is slightly better than last year and retail sales are recovering slowly.

Mr King said retailers had been hurt last year by a marked decrease in consumers' disposable income, but retail sales were picking up, although it will not be a boom Christmas.

"I think people actually have a little bit more to spend this year - not a lot, but a little bit more - and we are beginning to see retail sales recover slowly," he said.

"There's nothing terribly exciting going on, so it's not going to be a boom Christmas. But we are beginning to see some slow, steady pick-up in retail sales."

In its quarterly inflation report, the Bank predicted this week that consumer spending would stay subdued in the near-term, having slowed sharply since the end of last year, but that it would then pick up, helped by a gentle housing market recovery.

Official data on Thursday showed retail sales rose for the third month running in October.

For now, the Monetary Policy Committee appears to be in wait-and-see mode before the crucial Christmas shopping season and New Year wage round and looks likely to leave interest rates at 4.5 per cent for the next few months.