Worst Christmas for retailers in 18 years

High street retailers suffered their worst Christmas and new year trading period since the recession-prone 1970s, official figures showed yesterday.

High street retailers suffered their worst Christmas and new year trading period since the recession-prone 1970s, official figures showed yesterday.

The volume of goods passing through non-food stores between December and January - the benchmark for the festive period - dropped by 0.6 per cent on Christmas 2004. It was the biggest decline over the period since 1977, the Office for National Statistics said. Overall retail sales for February rose 0.2 per cent, but back revisions cut the three-month rolling average.

Nick Palmer, a statistician for the ONS, said: "The slowdown in the underlying rate of retail sales growth seen towards the end of 2004 has continued, with sales since the beginning of 2005 now in decline."

Department stores, household-goods retailers and a catch-all category of small shops - such as bookstores and chemists - fell, while clothing, catalogue and internet-only retailers rose. Analysts said the weakness would encourage the Bank of England to keepinterest rates on hold.

Lorenzo Codogno, at Bank of America, said: "The strength of consumption around the Christmas period can now start to be assessed and the figures do not leave a reassuring picture."

Ciaran Barr, at Deutsche Bank, said there was concern that the recent weakness was "indicative of something more insidious". He said: "With inflationary pressures threatening but not yet developed, the Monetary Policy Committee is unlikely to sanction a further increase in the base rate."

The figures will strengthen the hand of the doves on the MPC, notably Stephen Nickell who told The Independent last month it would be a mistake to raise rates before there was a clear picture of consumer spending. But other analysts took a more optimistic note, saying February was tough for retailers because of the bad weather.