Surprise growth in retail sales


Published: Friday 23rd January 2015 by The News Editor

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Retail sales volumes grew by 0.4% last month despite Black Friday promotions bringing forward many pre-Christmas purchases into November.

It was the weakest December growth for two years but beat City expectations that the figure would be lower due to the US-imported sales phenomenon shifting shopping patterns. Year-on-year growth was 4.3%.

The data was skewed by the fact that Black Friday sales were included in November’s figures for 2014 but were recorded within December’s numbers the year before.

But underlying figures comparing sales in the last quarter of the year with the same period in 2013 showed the best growth in a decade, with the 5% improvement the best since November 2004.

Average prices were 2.2% lower last month compared with December 2013, the largest fall since June 2002, largely as a result of plunging petrol prices.

December’s volume growth was driven by supermarket sales and an increase in motorists filling up their tanks thanks to cheaper petrol.

Department stores suffered from the impact of Black Friday as their online sales fell year on year for the first time since records began at the start of 2008.

Month-on-month volumes for these stores fell by 4.5%, the worst decline since January 1996.

Retailers grouped under “other stores” also had a strong December with month-on-month growth of 5.2% and a year-on-year improvement of 14.1%, according to the figures published by the Office for National Statistics (ONS).

This included sporting equipment, toys, flowers and computers.

Supermarket sales volumes grew 1.3% in December compared with November and by 1.1% year on year. Non-food stores fell 0.6% on the month with textile, clothing and footwear stores declining by 1.1%.

The amount spent in the retail industry last month was £45.2 billion over the five-week reporting period, equating to £9 billion a week, compared with £7.9 billion a week in November and £8.9 billion a week in December 2013.

However the value of internet sales decreased by 2.8% compared with November, the largest fall since August 2012.

The strong three-month performance of the sector will provide a boost to overall gross domestic product (GDP) figures published next week.

Paul Hollingsworth, of Capital Economics, said: “December’s retail sales figures paint a surprisingly upbeat picture of high street spending over the Christmas period.

“This suggests that UK retailers’ adoption of the US tradition of heavy discounting around Black Friday did not merely cause consumers to bring forward their Christmas purchases, but encouraged them to spend even more.”

James Knightley, of ING Bank, said the retail sales data was “surprisingly strong” and the implications of strong consumer spending could mean an interest rate hike later this year is still possible despite the plunge in inflation to 0.5%

He said: “With real incomes set to rise due to rising wage growth and falling inflation, tax cuts coming through and employment continuing to make strong gains, 2015 in general should see consumer spending perform well.

“So, while inflation is currently very low and could in the very near term push below zero, we suspect that medium-term inflation pressures will build through 2015, suggesting that rate hikes are not out of the question later this year.”

Published: Friday 23rd January 2015 by The News Editor

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