By David Milliken and Andy Bruce
LONDON Jan 17 British retailers had the fastest
annual sales growth in more than nine years last month,
confounding gloomy reports from many bigger chains and
offsetting some signs of weakness in other areas of the economy.
Sterling jumped and government bond prices tumbled after the
data, which was much stronger than expected. It revived
speculation about when the Bank of England might raise interest
Helped by a strong performance by smaller stores, British
retail sales surged by 2.6 percent in December to show an annual
rise in volumes of 5.3 percent - the fastest growth since
October 2004 - Office of National Statistics (ONS) data showed
This far outstripped economists' forecasts before the data
for monthly growth of 0.4 percent - similar to November's rate -
and for sales to be 2.6 percent higher on the year.
The upbeat figures increase the chance that there was
strong overall economic growth in the last three months of 2013,
though weak sales in October and November mean that for the
quarter as a whole, sales volumes are up just 0.4 percent.
Alan Clarke, an economist with Scotiabank in London, said
Friday's data would not push gross domestic product growth
above 1 percent in the fourth quarter, but would help offset the
hit from weak construction data last week.
The ONS numbers contrasted with figures from the British
Retail Consortium which covered mostly bigger stores and
suggested shoppers spent just 1.8 percent more in December than
a year earlier, slowing from November.
However, the government statistics showed sales at smaller
stores with less than 100 employees rose by an annual 8.1
percent in December, compared with 2.6 percent growth for larger
The surge in sales at smaller retailers might reflect bad
weather in December which could have prevented shoppers from
reaching bigger stores, some economists said. Online sales also
performed very strongly.
Laggards among the bigger chains include supermarket Tesco
, Britain's biggest retailer, which posted a fall in
Christmas sales even though it has invested over 1 billion
pounds ($1.63 billion) in a turnaround plan and Marks & Spencer
, which posted a tenth straight quarterly fall in
underlying general merchandise sales.
Other poor performers were Morrisons, the
fourth-biggest grocer, and Debenhams, the country's
second-largest department store group.
Equity analysts scaled back full-year profit expectations
for these firms, which variously blamed a continuing squeeze on
household incomes, an unprecedented level of pre-Christmas
discounting, fewer customers on the high street and unseasonally
Friday's figures are likely to help Britain's economy record
a strong end to 2013 when fourth-quarter gross domestic product
data is released on Jan. 28.
Britain's economy grew by 0.8 percent in the three months to
September, well above its long-run average.
Some economists are concerned about the longer-term
prospects for British consumer spending, as it has partly been
funded by households reducing how much they save, as wages have
risen much more slowly than inflation.
"It's very possible that consumers could take a breather
after finally splashing out for Christmas and in the sales,
given that inflation is still running at double the rate of
earnings growth," said Howard Archer at IHS Global Insight.