A report from the centre for economics and business research (cebr) says that UK interest rates could rise in the new year depending on the strength of the Christmas spend.

The cebr says there may well be erratic factors in the Q3 GDP data leading to the currently issued weak figures and in addition, actual ONS retail sales figures have been rather stronger than the surveys of retailers. One factor to which specific reference has been made has been strong sales by 'mail order'.

Douglas McWilliams of the cebr said, "We suspect that much of this is the rapid spread of Internet shopping."

"Moreover we would expect that individuals might well do that part of their Christmas shopping that they do on the Internet earlier in the year - allowing for postal delays - than their purchasing from the shops. So the CBI and Retail Consortium surveys of retailers may not be fully capturing one important and fast growing element of the modern retail environment."

On top of this the latest BDO poll of polls, a detailed analysis of business survey results that cebr carries out for BDO Stoy Hayward, showed the business optimism index - which looks further ahead than the business outlook index (which was indicating weak GDP) - as showing stronger optimism. And meanwhile, monetary growth - which does not always predict what will happen to GDP but which can be a useful additional item of evidence - is still running rapidly enough to point to reasonably strong growth in 2005.

Trying to put all this together requires a careful weighting of the economics information. It is clear that GDP growth has slowed at least temporarily during the summer. The initial published statistic for GDP for Q3 may exaggerate the scale of the slowdown and may be revised up slightly.

"But we should be careful about assuming that the slowdown will continue," says Douglas McWilliams, "Indeed our best estimate is that quarterly UK GDP growth in Q4 will be 0.7% compared with 0.4% currently reported for Q3. And remember that (before seasonal adjustment) retail sales per week in November and December typically run 25-30% higher than in July and August."

"So what happens in these two months is much more important for actual activity than the figures for the summer."

"So we are very cautious about assuming that interest rates have peaked. If pre Christmas spending figures are strong then a rate rise in January or February is quite likely."