Retail sales rise in run-up to Christmas as analysts predict New Year slowdown

Over a third of retailers polled reported that sales volumes were up in December, compared to same time last year

Analysts believe that financial pressures faced by consumers, such inflation rising faster than wages, will lead to a slowdown in spending next year (Getty)

British retail sales rose in the run up to Christmas, according to the latest survey from the CBI, although Black Friday may have caused UK consumers feeling the financial squeeze to bring forward purchases.

The CBI’s Distributive Trades Survey reported that 37 per cent of retailers recorded an increase in sales volume in December, compared to the same time last year.

This compares to 17 per cent that said they were down, giving a balance of 20 per cent – down from 26 per cent the previous month.

The CBI said that grocers were the main driver of retail sales growth in December, but other sectors also performed well: most notably mail-order retailers and DIY stores.

However, Howard Archer, senior economist at EY Item Club, said that as the survey covers late November as well as the beginning of December, it is unclear as to what extent Black Friday discounts and promotions brought forward sales.

While the news will bring some much-needed cheer to retailers before Christmas, analysts believe that the financial pressures consumers are currently facing will lead to a slowdown in spending next year.

With inflation rising faster than wages, consumers are beginning to feel the pinch and have cut back on their household budgets.

“Retailers have seen decent growth heading into the vital Christmas trading period, although it was weaker than expected,” CBI economist Alpesh Paleja said.

“Notwithstanding the sales growth seen in the last couple of months, underlying trading conditions are tough for retailers. We expect the squeeze on real pay for households to last a while longer, so retailers will still face challenging conditions ahead,” he added.

The survey of 109 firms found that 27 per cent of respondents expect sales volumes to increase next month, with 10 per cent expecting a decrease, giving a balance of 17 per cent.

Samuel Tombs, chief economist at Pantheon Macroeconomics, said the survey points towards “middle-of-the-road pre-Christmas trading for retailers”.

“Retailers are holding less stock than this time last year, potentially indicating that post-Christmas discounts will be less generous than usual and that inflation will fall only modestly from November’s 3.1 per cent rate over the coming months,” he said.