Retail therapy to bring a happy high street Xmas

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Retail sales will remain buoyant until after Christmas as people reject foreign travel, and those made redundant opt for a spot of retail therapy to find the feelgood factor.

"There should be enough momentum to last through October into the busy Christmas period and hopefully into the January sales," said Amanda Aldridge, head of retail at KPMG. The momentum is being provided by people refusing to travel, and therefore spending in Britain, and by consumers choosing to "live now and pay later". "There has been no impact from job losses yet," she added.

Interest rate cuts – last Thursday the rates were cut by a further 0.25 per cent – are also helping to keep sales buoyant. "The retailers accept there will be a downturn, but it is a question of when," Ms Aldridge said. She believes sales will drop in February, partly because people will feel less optimistic.

"The reality of people being out of work for a period will catch up. People will be disappointed with their Christmas bonuses and the credit card bills from Christmas spending will be landing on the door mat," she predicted.

Retailers based in London and other areas that usually attract tourists will suffer the most. DIY and kitchen and homeware stores will benefit in the long term, since if the housing sector slows, people tend to stay put and focus on doing up their homes. Discount retailers should also do well, having taken more and more market share from the mid-range retailers over the past five years.

Fashion stores that have a target market of young people, consumers who are not tied down by mortgages and children, are also seen as more recession proof. British Retail Consortium figures show sales continued to grow in September, despite the terrorist attacks. Total sales were up 8.1 per cent compared to the previous year, with a 7.9 per cent rise in August.

The figures and the apparent growth were influenced by the fuel crisis in September 2000, when there was increased demand for food and drink but reductions in other non-food items.