The next two months will reveal the true health of the retail industry, according to retail analyst at TLC Marketing Worldwide Gemma Lovelock.
She suggests that it is hard to read too much into robust trading in January because the seasonal sales and discounting that takes place during the month creates “an artificial backdrop” to retailing.
Her comments come after the release of this month’s Confederation of British Industry (CBI) Distributive Trades Survey, which shows that 61 per cent of retailers saw sales volumes rise in the two weeks from January 4th.
Some 24 per cent of the 65 retailers questioned experienced a fall in trading, resulting in a balance of +37 per cent and a significant year-on-year increase.
Ian McCafferty, CBI Chief Economic Adviser, remarked: “The lure of seasonal sales and price discounting may have helped mitigate some of the impact of the VAT increase on volumes.
“However, retailers expect the pace of sales growth to slow further next month, and orders placed with suppliers have flattened out.
“Consumer demand is expected to be weak in the coming months, as the spending power of households is hit by a combination of sharply rising prices and weak wage growth. Retailers can expect a challenging period ahead.”
Lovelock agrees, suggesting that rising inflation and unemployment, as well as slowing wage growth and a contracting economy, will not be ideal for retail.
She said: “The fog caused by seasonal sales and discounting will clear in February and March and we will then get a far clearer picture of what is happening on the high street.”