What tune are the cash registers ringing out this Christmas? A joyful carol of consumer confidence; or a melancholy dirge as yet more high street giants prepare to go the way of Woolies?

There appear to be tidings of comfort and joy in figures from the Office for National Statistics (ONS). They show an increase - yes, increase - in high street sales for last month: up 1.5 per cent year on year. Alistair Darling will want to celebrate with a particularly strong cup of tea, surely. But before we crack open those bottles of discounted champagne, we should consider the CBI figures released yesterday showing the worse downturn in retail activity since records began.

How to explain? Well, look closely and you will see that those CBI figures are for the first two weeks in December, the days after the Government's VAT cut. The increased November sales came after the 1.5 percentage point fall in interest rates but before the Government's VAT cut set alarm bells ringing.

The cut in interest rates, with the implied promise of more to come, would have produced instant relief in anyone with a mortgage, which inevitably translates into a few shopping treats. The problem was the VAT cut, and the unmistakable whiff of fiscal desperation that came with it. Suddenly, lower interest rates no longer felt like a welcome bonus. If the economy needed such strong medicine, then perhaps the patient was worse than we thought. So we all slammed on the brakes. Familiar with panic buying? Well, this is panic saving.

Nevertheless, some brave souls are still shopping. After all, with interest rates at their lowest since the Second World War, the money is practically useless in the bank - if indeed it still remains in the bank, and not at the bottom of Mr Madoff's naughty pyramid scheme.

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