Retail undermined by shock Christmas data

Disappointing ONS growth figures spark row with BRC about accuracy of data
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The Independent Online

The Office for National Statistics dampened spirits on the high street yesterday when its official figures showed only a moderate increase in retail sales for the key Christmas trading period.

The numbers, which showed an increase in total sales of just 0.3 per cent between November and December, come despite a raft of impressive figures from larger store chains.

Several analysts had anticipated stronger numbers, especially after recent data from organisations such as the British Retail Consortium (BRC), soothed fears that shops had struggled over Christmas. The ONS numbers also indicate that any economic recovery may be limited.

"The weaker-than-expected increase in retail sales points to a more challenging Christmas season than was initially indicated by a number of larger retail chains," said David Kern, chief economist at the BRC.

"Although the figures are still consistent with a return to positive economic growth, it is clear that any recovery remains fragile and patchy.

These figures suggest that smaller, independent retailers outside the major chains are facing the biggest hurdles." The Federation of Small Businesses (FSB) confirmed that its members were still struggling, despite the improving economic picture. John Wright, the national chairman of the FSB, said: "With inflation rising to 3 per cent and continued high unemployment, it is a shame, but not a surprise, that retail sales are down."

The ONS said sales in December were up 2.1 per cent compared with the year before. By contrast, the BRC said earlier this month that December sales had risen by 4.2 per cent compared to 2008. The BRC criticised the ONS data, saying it was too pessimistic.

"The figures are right to show that December sales values were up on a year ago," said Richard Lim, another economist at the BRC. "Customers clearly felt more confident about spending than they have for some time.

"Sales growth was also helped by the VAT cut dropping out of the 12-month comparison, December being the first and only month where the 15 per cent rate is the same as a year earlier.

"But these ONS sales figures paint a more pessimistic picture than we would have expected. The ONS's figure of 2.6 per cent for annual growth in sales values is less than half the 6 per cent result in our own Retail Sales Monitor, published last week.

"It is also at odds with a spate of company trading results since Christmas that show December sales well up on the previous year."

The BRC says its figures are based on the results of 60 per cent of traders on the high street, including the largest companies. The ONS figures are calculated from a survey of about 5,000 businesses each month. They are often revised as additional results reach the organisation.

The downbeat ONS figures do not reflect strong December trading by a number of stores. Yesterday, John Lewis said its sales in the week to 16 January were up 11.1 per cent on a year ago, while Morrison's supermarkets revealed on Thursday that sales in the six weeks to 3 January were up 10.8 per cent. Tesco and Marks & Spencer have also reported upbeat trading.

Data row: The ONS and the BRC

*Yesterday's row about the official retail sales figures is not the first time the ONS and BRC have fallen out over the strength of Britain's high streets.

In August 2008, the official data was met with incredulity by economists and the retail industry. The ONS reported that in the second quarter of that year, retail sales jumped 0.7 per cent, adding that the general picture was positive. By contrast, the BRC argued at the time that its members were reporting a much less rosy picture and the ONS figures did not reflect reality. Earlier that year, the deputy governor of the Bank of England, Charles Bean said that the Monetary Policy Committee now, "places less weight on the official data on retail spending for the present".

The ONS claims that its data are from the widest array of companies, and that BRC figures do not "effectively reflect sales by small and medium businesses." The BRC says it takes the details of 60 per cent of all retailers, and not just its members.