Christmas retail sales a 'disappointment'

Friday 22nd January 2010

The retail sales volumes over Christmas were a "disappointment" according to analysts, as figures failed to show a significant rise.

The Office for National Statistics (ONS) said retail sales volumes rose a mere 0.3 per cent in December, far from the 1.1 per cent rise which had been forecast.

Rising prices, recently seen by this week's inflation figures, were deemed as one of the reasons given for the unexpected lack of retail sales.

Sales volumes on the previous year were up 2.1 per cent, again below forecasts.

Howard Archer, chief UK and European economist at IHS Global Insight commented: "Retail sales disappointed hugely in December, with volumes rising by just 0.3 per cent month-on-month.

"It appears that retail volumes were significantly hit in December by retailers engaging in less discounting.

"Given that consumer spending accounts for some 65 per cent of GDP, the limited rise in retail sales volumes in December modestly dilutes hopes that the economy saw a significant rise in GDP in the fourth quarter of 2009.

"Meanwhile, December's lower-than-expected growth in retail sales volumes fuels suspicion that the upside for consumer spending - and hence overall economic growth - will be limited in 2010 as households face still challenging conditions."

The ONS said in its figures that within predominantly non-food stores, the largest rise was in household goods stores which rose by 3.5 per cent. Textile, clothing and footwear stores rose by two per cent while non-specialised stores rose by 1.6 per cent. Other stores fell by 0.2 per cent over the period.

According to Travelex the Sterling fell across a "basket of currencies in response to the news, hitting a session low".

Mark Bolsom, head of the UK Trading desk at Travelex, said: "We were expecting that the UK’s retail figures would be supported by a surprise fall in unemployment. However, whilst our labour market is steadying, the downside is that with inflation increasing, prices are going up, and our earnings growth is steadily weakening – which therefore is affecting our spending habits on the high street.

"There has been growing evidence from the markets that economic conditions in the UK are expanding and contraction has halted. However, given that consumer spending accounts for about 65 per cent of the UK's GDP, these latest figures will not provide much comfort to the markets that Britain is on the road to recovery."

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