A rush to fill up cars with cheaper petrol and a jump in food shopping for Christmas helped UK retailers enjoy a surprise increase in sales last month.
Official figures showed retail sales rose 0.4% from November, defying expectations for a fall among City economists. On the year, December sales were up 4.3%, again a much stronger performance than the 3% rise forecast by economists in a Reuters poll.
The figures bolstered expectations that consumer spending will continue to drive the recovery as households begin to feel some relief from low inflation and a gradual pick-up in wages.
“Sales look likely to continue to rise in coming months,” said Chris Williamson, chief economist at Markit, which publishes surveys on the UK and other economies.
“Wage growth is picking up and inflation has slumped. Employment also continues to rise, meaning more people are earning. Lower oil prices will meanwhile cut motoring and utility bills further in coming months. The icing on the cake is the fact that interest rates look likely to stay at their current historic record lows for even longer than previously thought.”
The data from the Office for National Statistics showed fuel sales helped drive much of December’s overall growth, suggesting motorists were trying to make the most of petrol and diesel at multiyear lows thanks to a sharp fall in oil prices. There was also help from supermarkets, which have been locked in a fierce price war.
But the figures also echoed other reports of pressure on retailers’ margins as growth in sales volumes continued to be accompanied by falling prices. Average store prices fell at the fastest annual rate for 12 years in December, down by 2.2%.
After industry figures last week showed retail sales slowed in December, there had been fears that US-style Black Friday offers in November would have hit last month’s performance on the official figures. But as it was, sales defied expectations.
Paul Hollingsworth, of the thinktank Capital Economics, said the data painted a surprisingly upbeat picture of high street spending over Christmas.
“This suggests that UK retailers’ adoption of the US tradition of heavy discounting around “Black Friday” did not merely cause consumers to bring forwards their Christmas purchases, but encouraged them to spend even more,” he said.
“Indeed, sales volumes were a whopping 2.3% higher in the fourth quarter [of 2014] than in the third quarter, the strongest quarterly growth rate since April 2002.”
But not all stores escaped the Black Friday blow to December. Department stores bore the brunt of Christmas shopping being moved forward to November and their sales fell 4.5% on the month, the weakest performance since January 1996. While there was some annual growth in sales volumes, at 1.1% it was the weakest for more than a year.
