Retail sales rebound as confidence returns

Retail sales rebounded strongly last month after heavy snowfall hit trading on the high street in December, but industry experts have warned that consumers face "serious headwinds" in the months ahead.

A rush by consumers to beat the VAT rise on 4 January and continued heavy discounting helped drive sales volumes up by 1.9 per cent between December and January, according to the Office for National Statistics, which was ahead of City expectations of a 0.5 per cent rise. But the January figures were flattered by ONS revising the actual sales fall in December to 1.4 per cent from 0.8 per cent.

Barry Knight, the head of retail at Grant Thornton UK, said: "This increase may be due more to post-Christmas discounting and promotions by retailers, as well as the rush in early January to beat the VAT increase than an actual increase in consumer spending." John Lewis, the department store chain, yesterday posted sales up by 1.4 per cent for the week to 12 February, adding to the view of subdued consumer spending.

According to the ONS, retailers grew volumes by 5.3 per cent in January, compared with the same month last year which was affected by heavy snowfall – while sales by value, excluding petrol, surged by 6.7 per cent. Accounting for rising petrol prices, sales by value rocketed by 8.2 per cent in January – the highest rise since April 2002.

In an earlier survey, the British Retail Consortium also pointed to a rebound in January with like-for-like sales up by 2.3 per cent.

ONS cited strong performances by retailers of computers, sports equipment and toys in January, which drove sales at other stores up by 15.8 per cent.

Non-specialised shops grew sales by 10.7 per cent, while they were higher by 9.5 per cent at general merchandise shops.

However, Howard Archer, the chief European economist at IHS Global Insight, said: "Despite January's rebound in retail sales, the likelihood remains that consumer spending will be limited over the coming months in the face of serious headwinds and will significantly hold back overall GDP growth."

Meanwhile, John Lewis said it had "no news" in response to speculation it is considering opening a shop in a 20-acre extension to the Australian developer Westfield's site in west London.