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News - 18 February 2011

Positive January retail figures could be deceptive

The Office for National Statistics (ONS) has published a 6.4% annual increase in the total value of sales for January. This is strong result but is it a sign of an upward trend or are there some very specific reasons why this trend will not continue into February.

According to the British Retail Consortium (BRC) the figures are distorted due to people rushing to beat the VAT rise and a knock on effect from the severe weather that prevented people getting to the shops before Christmas.

 Reacting to the figures published on Friday 19 February by the Office for National Statistics (ONS) British Retail Consortium Director General Stephen Robertson said, “Superficially, these are strong figures but they don’t indicate any permanent revival in customers’ willingness to spend.

“Though a 6.4% increase in the total value of sales is greater than the 4.2% recorded by our own Retail Sales Monitor for the same period, it is telling the same story.

“Growth this January was driven by a relatively short but strong burst of non-food buying early in the month. Some of that was spending held over from December when severe weather stopped people getting out. Shoppers also took their final opportunity to beat the VAT rise in the first few days of January. Then, even after the VAT rise came in, it did minimal damage to sales because the effect on prices was largely lost among a mass of discounts and promotions.

“But these are short-term influences. Our own figures show spending tailed off sharply as the month developed. Slumping consumer confidence indicates concerns about jobs and finances are now reasserting themselves. February’s results will be a better indicator of how things really are.”

Meanwhile online sales continue to rise unabated. According to figures from Experian Hitwise  this year saw the busiest post-Christmas shopping period ever seen online. In particular, big ticket items such as TVs and laptops were in high demand before the VAT increase on 4 January 2011 which no doubt contributed to the success of electronics brands like Apple, Currys and Comet this quarter.

It is becoming clearer that the high street needs to reinvent itself if it is to continue to thrive. Businesses will survive by selling online but the heart and soul of the city could very soon disintegrate if we cannot see a way to make shopping more of an experience.

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