Christmas surge lifts high street spend to 4-year high

A last-minute surge in Christmas spending left retailers celebrating their best December for four years, the industry's trade body said today.

The volume of sales passing through high street tills was 6.2 per cent higher than December 2004, the British Retail Consortium said.

Stripping out stores opened in the past year, seen as a better indicator of the trend, like-for-like sales were up 2.6 per cent. This was the largest gain since May 2004 and the best December since 2001. The BRC said sales picked up "strongly" in the week before Christmas and continued into the first two days but then dropped back "markedly".

This mirrored anecdotal evidence from analysts of footfall at major shopping centres that showed people flocking to grab bargains on offer but shunning the stores when sales stock ran out. The rebound turned a fall of 0.1 per cent over the three months to November into a 0.2 per cent gain for the final quarter of last year.

Helen Dickenson, the head of retail at accountants KPMG, which helped produce the survey, said retailers had avoided the mistakes of 2004 when they built up stocks ahead of a forecast bumper Christmas.

"This meant that retailers' plans and strategies in the run-up to Christmas 2005 were adjusted accordingly," she said.

The BRC said the shoppers were "very value-conscious", taking advantage of promotions and sales discounts. "Underlying conditions are still very tough and the first quarter of 2006 looks challenging, despite being up against weak comparatives in 2005," Kevin Hawkins, the BRC's director general, said.

The upbeat tone was echoed by John Lewis, the department store group that has emerged as a clear winner over Christmas, which said sales rose 7.1 per cent in the seven weeks to 7 January. Charlie Mayfield, its managing director, said: "It is good to see that the momentum at Christmas has carried through into clearance sales where sales are running well ahead of last year."

The BRC survey, which was even better than leaks at the weekend of like-for-like sales growth of 1.5 per cent, will be seen as a sign consumer spending has held up. Analysts said it would add to the overwhelming view in the City that the Bank of England's Monetary Policy Committee will hold back from cutting interest rates on Thursday.

"Accelerating gains in house prices and retail sales volumes, the pick-up in services activity and a solid CBI financial sector survey all suggest the likelihood of a near-term rate cut is falling," Malcolm Barr, UK economist at JP Morgan, said.

But Howard Archer, the chief UK economist at Global Insight, said the survey did not herald a marked pick-up in consumer spending. "We suspect spending will be relatively muted as several factors that have weighed on consumers through most of 2005 - higher tax burden, increased debt levels, higher utility and council tax bills - continue to impact," he said.