Retail figures improve confidence

NEW retail sales figures have added to hopes that a double dip recessions can be avoided.

The value of sales in January rose by 4.4% compared to 12 months earlier while volumes also increased 2%.

Sales value and volume also both rose 0.9% in comparison to December, defying expectations of a fall back.

Nida Ali, economic advisor to the Ernst & Young ITEM Club, said: "Heavy discounting still seems to be the main driver for the increase in sales, as retailers are continuing to slash prices to sustain market share. This is clearly an unsustainable strategy.

“The fundamentals underpinning consumer spending are still weak. Wage growth is sluggish, unemployment is on the rise and households are heavily indebted. With inflation now starting to cool, the pressure on individuals' incomes is likely to ease, but it will be a long time before real incomes actually start to increase. The challenge for retailers is not over yet."

The figures showed that the internet accounted for 11.9% of retail salesin January compared to 8.9% a year earlier.

Even with figures for fuel, where prices have risen sharply, stripped out, the year-on-year value of sales grew by 3.8%.

David Kern, chief economist at the British Chambers of Commerce, said: "This increase shows that the economy is slowly improving and supports our view that GDP will return to positive growth in the first quarter of the year.

"The figures support the view that inflation in the high street is falling. As this trend continues, we expect to see further modest increases in consumer spending later this year.

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