Retail News Update

Retail sales in Britain unexpectedly rose last month as the new year sales attracted bargain-hungry shoppers.

Sales of clothing, shoes, books and CDs all saw strong growth, but economists warned this was unlikely to continue as unemployment climbs further.

Retail sales volumes gained 0.7% in January from the previous month, according to the Office for National Statistics (ONS). City analysts had expected a fall of 0.1%.

The ONS said there was evidence of widespread discounting in clothing and footwear, which posted a 6.1% jump in sales, the biggest rise since May. Sales at other stores, such as bookshops and music stores, shot up by 6%, the largest monthly increase since January 1988.

A survey from the British Retail Consortium had painted a similar picture earlier this month.

“The figures supported the other evidence we’ve had to so far that spending seemed to hold up fairly well in January,” said Vicky Redwood at Capital Economics. “We still don’t think that spending is quite as strong as these official figures suggest and that, looking ahead, any strength over the last month or so is probably going to turn out to be just a blip. Spending will fall as the year progresses.”

Tourism is also playing a part as a result of a weaker pound, said Martin Slaney at City spread-betting firm GFT, but he added: “With the added burden of the recent bad weather I do not see this strength being maintained in February.”

Over the past three months, retail sales have climbed by 1.5%, the fastest rate of growth since May, today’s figures showed.

Purchases made on the internet now represent 3.7% of total retail sales. That figure has been growing steadily, from 3.1% in January 2008 to 3.5% in December. Internet sales averaged £178m a week in January.

“With unemployment rising rapidly, wealth losses mounting through falling equity markets and house prices, and confidence at record lows, we doubt that this firm run of official retail sales numbers will continue,” said James Knightley at ING.