High Street sales jump 1.1%

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The Independent Online

The high street avoided a World Cup hangover in July as retail sales volumes jumped 1.1%, official figures showed today.

The better than expected performance represented the highest month-on-month rise since February, the Office for National Statistics (ONS) said.

A strong rise in volumes for a broad mix of retailers, including sports equipment and jewellery shops, offset a flat month for department stores and lower household goods sales, the ONS said.

Shoppers are also likely to have been tempted in by price cutting on the high street after inflation figures on Tuesday showed the biggest slide in clothing and footwear prices for eight years between June and July.

But sales volumes from food stores were down 1% month on month as the impact of the World Cup faded while prices also rose. Household goods stores saw volumes fade 0.7% month on month as the pre-tournament boom in flat-screen televisions faded slightly.

Overall sales volumes were up 1.3% on a year earlier, although concerns remain over the prospects for the high street as the Chancellor's austerity measures loom.

VAT is set to be hiked to 20% in January as part of the coalition's deficit-busting package, while looming public sector belt-tightening and fears over unemployment are also likely to dent consumer confidence.

Vicky Redwood, UK economist at Capital Economics, said: "It doesn't look for now like the slowdown emerging in the rest of the economy has spread to the high street yet."

Analysts had been expecting a much weaker figure for retail sales volumes, with projections of 0.3% to 0.4% in month-on-month growth.

Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said the results were a "big surprise", but he expected sales to be more "muted" for the rest of the year.

He said: "The combination of weak earnings growth and high inflation is squeezing real incomes, while unemployment is likely to remain high with the public sector job cuts on the way."

David Kern, chief economist at the British Chambers of Commerce (BCC), warned against letting the stronger-than-expected figures invoke complacency.

He said: "The economy is still weak, businesses are struggling and the full impact of the emergency Budget's austerity measures are yet to take effect.

"Risks of an economic setback are significant, and it is important for the Government and Monetary Policy Committee to focus on supporting business and securing the recovery."

Philip Shaw, at banking group Investec, said it was unclear if the figures were down to the warm weather, England's early exit from the World Cup or clothing discounting.

He added: "But it does fly in the face of lower consumer confidence and a faltering housing market."