Surprise rise in retail sales revealed

 

The January sales helped retailers enjoy a surprise rise in trade last month but the figures failed to allay fears high streets will be blighted by more shop closures.

Sales volumes rose 0.9% between December and January, the strongest performance since the Royal Wedding and defying City expectations of a 0.4% fall, the Office for National Statistics (ONS) revealed.

Cash-strapped consumers splashed out on furniture and sportswear as a blizzard of promotions dragged shop price inflation to its lowest level for more than two years. But experts warned the discounts were unsustainable and high streets still face "another difficult year".

A separate survey today fuelled fears for the high street as it revealed that chains shut an average of 14 town centre shops a day last year as they increasingly shifted to retail parks and on to the internet. It warned further closures were expected.

The ONS figures do not reflect the full extent of the gloom on the high street, because much of January's growth was driven by internet sales and supermarkets.

British Retail Consortium director general Stephen Robertson said: "These numbers are slightly better than we would have expected but make it clear that price-cutting by retailers is what's driving any growth in business.

"Discounting is biting into retailers' margins with non-food businesses facing particularly tough times."

Mr Robertson called on Chancellor George Osborne to use next month's budget to take steps to make it more attractive for retailers to invest and create jobs, and reduce business rates, which are set to rise 5.6%.

Today's ONS figures were still seen as a welcome surprise, boosting hopes that the UK's economy can stave off another recession after the 0.2% fall in GDP in the final quarter of 2011.

The figures produced by the ONS are seasonally adjusted because January is normally a weaker shopping period than December, but they show that sales volumes in January were 2% higher than a year ago.

Excluding car fuel, volumes increased 1.2% between December and January.

Analysts had expected sales volumes to fall in January because many retailers brought forward special offers to before Christmas, sparking fears the normal January sales would have lost some of their traditional appeal.

Household goods sales saw their first sales growth for nearly a year, up 4.8% between December and January, as furniture stores put in a particularly strong performance with high levels of discounting.

The ONS also said there was anecdotal evidence that sportswear retailers had enjoyed a strong month.

The figures revealed that January's store prices were 2.2% higher than a year ago, the smallest rise since November 2009, as shoppers benefited from falling inflationary pressures and price cuts in the January sales. Every sector apart from clothes stores reported a slower rate of price increases than the previous month.

Samuel Tombs, an economist at Capital Economics, said even if the figures are taken at face value, there are reasons to think that the strong growth cannot be maintained.

He said: "January's strong growth goes against the much more pessimistic picture painted by anecdotal evidence and all of the retail surveys. Accordingly, the official figures may not be giving a true reflection of conditions on the high street.

"With unemployment on an upward trend, credit conditions tightening and real incomes still being squeezed, the underlying conditions for consumers are still tough."

Meanwhile, a survey of the 500 biggest town centres by PwC and the Local Data Company found last year was the first time since 2008 that multiple retailers failed to open as many stores as they closed.

They had previously been taking up the slack for independent retailers who had been worst hit by the economic downturn.

A previous report showed that an average of one in seven shops stood empty in 2011, with the vacancy rate rising above 30% in some parts of the country.

PA

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