Analysts surprised by strong retail sales figures

RETAIL sales in January rose 0.9% as consumers reacted to deep discounts on offer.

The increase surprised many analysts, with sportswear clothing and fitness equipment sales leading the way as shoppers began New Year fitness regimes.

Nida Ali, economic advisor to the Ernst & Young ITEM Club,said the figures were a “bolt from the blue”.

“The 0.9% monthly increase in retail sales was not expected, especially on top of the strong rise in December. Heavy discounting still seems to be the main driver for the increase in sales, as retailers are continuing to slash prices to sustain market share. This is clearly an unsustainable strategy.”

Despite the increase, she said the fundamentals underpinning consumer spending remain weak with sluggish wage growth,  rising unemployment and high levels of household debt.

“With inflation now starting to cool, the pressure on individuals’ incomes is likely to ease, but it will be a long time before real incomes actually start to increase. The challenge for retailers is not over yet,” she added.

Many experts had been expecting a 0.4% fall in high street activity following the Christmas boom, but the Office for National Statistics recorded the first back-to-back increases in a December and January in eight years.

Jeremy Cook, chief economist at foreign exchange company, World First, said: “I honestly thought this figure was a misprint when it came through. This 0.9% figure represents the largest increase since the Royal Wedding last year.

“Price discounting will have undoubtedly played a major part in this rise, whilst we must remember that external factors such as inflation and the state of the labour market will continue to have a depressing effect through the year.”