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Business News

Pre-Christmas retail uplift 'won't last'


A spate of early discounting has helped retailers attract shoppers before Christmas, but the uplift is not expected to last into the new year, a survey revealed today.

Business body CBI said retail sales volumes rose in December for the first time in seven months, with a balance of 9% of traders reporting an increase on a year ago when Arctic weather conditions kept shoppers at home.

Sales of food, toys and items sold via the internet all enjoyed strong growth, but consumers remained wary of buying "big ticket items" such as fridges and washing machines, and overall volumes were still below normal.

Expectations for next month remain bleak, with retailers forecasting that volumes will decline again despite it being a time of the year when shoppers are normally attracted by January sales.

Asda chief financial officer Judith McKenna, who is also chair of the CBI's distributive trades panel, said: "Early discounting helped retailers add a little extra sparkle to their sales in December, although the reprieve appears to only be temporary as they don't expect sales to continue to grow into January.

"Consumers are continuing to hold off on purchasing big ticket items, including durable household goods, preferring to use their hard-earned cash to stock up for Christmas dinner and all important gifts for the family."

Samuel Tombs, of Capital Economics, said the survey suggested that pre-Christmas trading "may not be the complete write-off that anecdotal evidence had been suggesting".

But he added: "The woeful state of consumers' finances suggests that, even if festive trading turns out to be brisk, the chances are high that the post-Christmas spending hangover is even deeper than usual."

Department stores reported slightly better sales following four months of declines. Hardware and DIY stores and shoe shops reported large declines, although clothes sales were flat and furniture and carpet stores enjoyed growth compared with the previous year.

Chris Williamson, chief economist at Markit, said: "The survey showed sales rising at the fastest rate since May, but the increase was driven by discounting, meaning retailers' profit margins are likely to be under intense pressure.

"Retailers expect January sales to be the weakest since August 2009, perhaps reflecting the fact that January sales are in effect already taking place in December in many cases."