December sees strong retail sales

17 January 2014 Last updated at 11:08 Christmas shoppers in London Christmas shoppers spent more in December than many analysts expected, the ONS figures suggest UK retail sales in December were up 5.3% on a year ago – the fastest annual sales growth in more than nine years.

The figures from the Office for National Statistics (ONS) suggested growth in consumer spending above the expectations of many analysts.

Trading updates from retailers have been mixed, and earlier this month the British Retail Consortium reported annual growth of just 1.8%.

December’s sales were up 2.6% compared with November.

Continue reading the main story image of Hugh Pym Hugh Pym Chief economics correspondent, BBC News

On the face of it, a bumper Christmas with retail sales steaming ahead in December. And yet…

Once you look beyond the volatility of a single month’s figures, the underlying trend looks more subdued.

October saw a fall in sales and there was only a marginal increase in November. So over the three months to December, compared with the previous three-month period, there was a 0.4% increase – respectable, but without much glitter or tinsel. Shoppers simply shifted their purchases closer to Christmas.

The figures don’t change the consensus view of overall economic performance in the final quarter of 2013 – growth of around 0.7% or 0.8%. But as always, the data provides a fascinating glimpse of trends in the retail world, with the switch to online from in-store shopping all too clear.

“This December was much better than what we’ve seen in previous years,” Kate Davies from the ONS told the BBC.

“It’s the small stores that are very much driving growth – they are seeing a consistent gain of 8% annual growth, while large stores are seeing 2.6% growth.”

She said online sales now accounted for about 12% of sales, and growth in online was being seen across all sectors due to the investment many retailers were putting into their websites.

The figures covered the period between 24 November and 28 December.

‘Spectacular and surprising’

The results took many analysts by surprise, particularly following less positive figures from the BRC and anecdotal evidence from some retailers suggesting a subdued Christmas.

“UK retail sales showed spectacular and surprising strength in December, as discounting by stores drove a huge increase in the volume of sales,” said David Tinsley, UK economist at BNP Paribas.

“The size of the jump in retail volumes is somewhat surprising against surveys of retailers and consumers which have not looked so strong, and fairly mixed Christmas trading reports from retailers.”

Kate Davies, head of retail at the ONS, said that it is “the small stores that are very much driving growth”

Over the past two weeks, a raft of trading updates from retailers has painted a picture of contrasting fortunes over the Christmas period.

Supermarkets including Tesco, Sainsbury’s and Morrisons saw disappointing sales, although budget and higher-end food retailers did better.

Department stores including John Lewis and House of Fraser reported healthy sales, but Marks and Spencer and Debenhams struggled.

The positive retail figures may indicate strong growth in the overall economy in the final three months of 2013.

The UK economy grew by 0.8% in the three months to September, and more growth is expected when GDP data for the fourth quarter is released later this month.

View the original article here

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