Monday Christmas set to boost high street

ONE of the UK's top economic prediction firms has forecast a better-than-expected £24 billion worth of sales this month - an 8 per cent rise on last year - mainly as a result of Christmas falling on a Monday.

However, the Centre for Economics and Business Research (CEBR) also warned it did not expect the momentum to continue into the New Year.

Official November retail sales figures from ONS this week showed sales volumes up 3.2 per cent on the previous year and stores giant John Lewis has already reported its highest-ever weekly sales, earlier this month.

However, it is not all good news on the high street, with HMV and Woolworths announcing profit warnings while Debenhams, Gap and French Connection advertise large discounts on stocks, hoping to attract more Christmas shoppers.

However, CEBR says December will prove a surprise fillip for the retail sector as a whole, pointing out that, with Christmas falling on a Monday, festive spending is likely to be especially concentrated over the pre-Christmas weekend.

"Against retail patterns in years when Christmas Day has fallen on different weekdays, we estimate the value of Christmas shopping will be 26 per cent higher than the value of sales in November this year," it said in its report.

"This compares with an average increase in sales between November and December of 21 per cent in years when Christmas does not occur on a Monday. Combining this with the underlying economic conditions, we estimate sales will reach 24bn this December, with sales this Christmas 8 per cent up on 2005."

Economist Thushani Gajasinghe added: "With a Monday Christmas, consumers and retailers are playing a game of 'chicken', with consumers holding off buying in the hope that they will get discounts in pre-Christmas sales, while retailers have been holding off cutting their prices in the expectation that eventually customers will have to buy their presents."

However, despite robust 2006 spending on the high street, the CEBR does not expect that momentum to race into 2007.

Gajasinghe's footnote warns: "As the world slowdown begins to bite, higher interest rates push up mortgage payments and rising inflation dents real wage growth we expect consumers to cut back on spending and retailer's smiles to fade."