17th January 2014
British retailers enjoyed a bumper festive period with annual sales growth rising to its best level in more than nine years writes Philip Scott.
According to numbers from the Office for National Statistics retail sales jumped 2.6% month-on-month and 5.3% year-on-year, far above expectations and the fastest growth since October 2004.
The figures deliver a welcome injection of positivity given a far from spectacular December survey from the British Retail Consortium.
The surge in December following a muted overall performance in November and October indicates that consumers left much of their Christmas spending late in the hope of getting better late deals from retailers says Howard Archer, chief UK and European economist at IHS Global Insight.
He adds: “It also implies that spending was strong at the start of the clearance sales as squeezed consumers looked to take advantage of genuine bargains.
“Indeed, it is notable that the year-on-year increase in the retail sales price deflator excluding petrol slowed to 0.7% in December from 1.0% in November, indicating that retailers were more aggressive in their discounting and promotions as they tried to get consumers to part with their cash. This will obviously have hit many retailers’ margins significantly.”
December’s strong retail sales performance provides a major boost to hopes that GDP growth in the fourth quarter of 2013 remained up around the 0.8% quarter-on-quarter rate achieved in both the third and second quarters.
Even so, it should be noted that because of lacklustre overall sales in November and October, retail sales volumes growth in the fourth quarter of 2013 was limited to 0.4%, which was down substantially from growth of 1.6% quarter-on-quarter in the third quarter.
Archer adds: “Looking ahead, there is some uncertainty as to how robust consumer spending will be in the early months of 2014. It is very possible that consumers could take a breather after finally splashing out for Christmas and in the sales, given that inflation is currently still running at double the rate of earnings growth.
“Consumers’ purchasing power should continue to improve over the coming months, although it may not be before mid-2014 that earnings growth finally moves above inflation.”