Surprise data leaves retail sector with a warmer glow

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The Independent Online

Retailers shrugged off the snow and achieved their strongest sales for more than eight years this month as shoppers brought forward purchases before next month's VAT rise, the Confederation of British Industry (CBI) reported yesterday.

A net balance of 56 per cent of shopkeepers said sales had improved in December, with 67 per cent reporting a rise and just 11 per cent suffering a fall, according to the CBI's Distributive Trades Survey. It was the sixth monthly sales increase in a row and the highest net balance figure since 57 per cent of traders reported growing sales in April 2002.

"December's strong survey balance is also likely to capture spending being brought forward, ahead of the January increase in VAT," said the CBI's chief economic adviser, Ian McCafferty. "Retailers expect sales growth to lose some momentum in the new year. We remain cautious about prospects for the retail sector further ahead, given ongoing uncertainty over the resilience of consumer spending."

The top performing sub-sectors in December were hardware, DIY and clothing shops, as well as department stores and grocers. But a more modest balance of 35 per cent of retailers expect sales to be higher next month, partly because it will overlap the aftermath of VAT rising to 20 per cent on 4 January.

Furthermore, the CBI's upbeat poll – conducted between 25 November and 8 December – was out of kilter with the more subdued growth reported recently by the British Retail Consortium and the Office for National Statistics.

Vicky Redwood, the senior UK economist at Capital Economics, said the CBI survey suggested high street spending was "roaring away in the run-up to Christmas". "[It] gave no indication that the snow earlier in the month had an adverse effect on trading," she added.

Richard Lowe, of Barclays Corporate, said stores would be "pulling out all the stops" this Saturday and Sunday with discounts on big-ticket purchases on the busiest weekend of the year. "The last full weekend before Christmas will be key, with retailers hoping that shoppers are willing to brave the cold," he said.

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