Small stores top bill as festive trade defies gloom

BNP Paribas economist David Tinsley. Picture: Contributed

Retail sales across Britain jumped by 2.6 per cent during December, equalling an all-time record.

Analysts had pencilled in a rise of about 0.3 per cent over the month, a make-or-break period for many high street businesses.

The upbeat result from the Office for National Statistics (ONS) will increase the chance of strong overall economic growth in the closing three months of 2013. It also contrasts with recent numbers from the British Retail Consortium whose survey largely covers bigger stores.

Sterling jumped and government bond prices tumbled after the data, which also revived speculation about when the Bank of England might raise interest rates.

The ONS report showed that small stores – the mainstay of many town centres – did particularly well, with the amount spent in them increasing by 8.1 per cent as against 2.6 per cent for larger stores, compared with December 2012.

Department stores, meanwhile, saw sales volumes surge by 11.7 per cent – the strongest year-on-year growth since January 2000.

The figures come on the back of buoyant trading updates from the likes of Argos, Halfords, Next and Primark, though Debenhams and Marks & Spencer have struggled. Experts were taken by surprise. Alan Clarke of Scotiabank described it as a “boom” with the headline 2.6 per cent figure “massively higher than expected”.

David Tinsley, UK economist at BNP Paribas, pictured below, said: “UK retail sales showed spectacular and surprising strength in December, as discounting by stores drove a huge increase in the volume of sales.

“While reports of aggressive discounting could have been expected to have driven some volume, it seemed more likely that this would show up in the January data. In the event, it looks like December has captured most of the jump and we would look for a correction in January.”

David Kern, chief economist at the British Chambers of Commerce, said the latest sales figures made for “good news” that would help offset some of the concerns that Christmas trading had been weak.

He added: “The recovery is gathering momentum and as our recent quarterly economic survey shows, the pace of expansion is likely to strengthen in the near term. The government must avoid complacency, and should continue to implement measures to boost growth, particularly while risks to the recovery still linger at home and abroad.”

The month-on-month figure included an 8.7 per cent rise for department stores, with a 2.4 per cent increase for grocers and a 4.8 per cent hike for non-store retailing, which includes internet-only as well as mail order businesses.