The CBI said its monthly retail sales balance fell slightly to +27 in November from +31 in October, a somewhat bigger drop than the fall to +30 forecast by economists polled by Reuters.

But retailers' expectations for December picked up to +38, their highest level since September.

"We're seeing encouraging signs that pressure on family budgets is letting up, and ... there can be some optimism for retailers and customers alike as we enter the crucial run up to Christmas," said Barry Williams, an executive at Wal-Mart's (>> Wal-Mart Stores, Inc.) Asda supermarket chain who chairs the CBI survey panel.

British retail sales dipped in September, as warmer than usual weather discouraged shoppers from buying new autumn fashions. But last month the CBI figures showed the strongest quarterly average growth in more than three years.

Quarterly data also released by the CBI on Wednesday showed that retailers' overall assessment of the business situation was the weakest in a year, against a backdrop of the smallest price rises in more than five years.

This tallies with recent official inflation data, which has shown prices rising at around their slowest rate since 2009.

The Bank of England said on Tuesday that it expected consumer demand to stay strong, as households reduced precautionary saving made during the financial crisis and banked on wage rises to come.

Official data released on Wednesday showed household spending rose at its fastest pace in more than four years in the three months to September.

(Reporting by David Milliken, editing by William Schomberg)