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Expert opinion: ONS retail figures

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Retail sales in December 2013 rose by 5.3 per cent compared to December 2012 as sales in smaller stores posted a stellar 8.1 per cent rise compared to large stores rise of 2.6 per cent.

The Office for National Statistics (ONS) said less money is being spent in food stores and petrol stations which continued to offset growth from sales rises in non-food stores and non-store retailing.

Internet sales, which were seasonally adjusted, surged 11.8 per cent in December compared to the same period last year and by 1.8 per cent compared with November 2013.

Here’s what senior financial advisors and consultants made of the results.

Ian Geddes, UK head of retail at major consultancy player Deloitte, said: “Today’s results indicate a successful festive season for the majority of retailers, significantly improving on last year. Undoubtedly, we have seen polarised performances, with those that held their nerve in the run-up to Christmas reaping the rewards. In addition, retailers that were able to provide flexible delivery won over consumers, as their confidence in next-day delivery and click-and-collect services rose. Overall, the winners heavily outweighed the losers.

“Across the categories, department stores, technology and clothing all did well. In contrast, the supermarkets suffered a difficult Christmas due to a variety of factors including the rise of the discounters, a more frugal attitude to buying food and a fall in inflation. Online sales leapt up, but retailers should not underestimate the role of the store. As click-and-collect becomes the fulfilment service of choice, brands must ensure they capitalise on the footfall and maximise the opportunity for additional sales. This is all the more important given the continued strain on consumers’ purse strings. The retail industry will look forward to the coming year as the economy continues to improve, but the golden question remains – when will this translate into more pennies in wallets?”

Daniel McCormack, Head of UK and European economics for financial provider Macquarie, said “The incredible strength of the number raises some question marks about seasonal adjustment. The statistician often has difficulty seasonally adjusting the retail sales data and this may have been a factor contributing to the strong rise.

“While the data suggest UK consumer spending entered 2014 with plenty of momentum we think momentum in spending will slow going forward. The strong spending numbers in recent times have been supported by temporary factors in our view – PPI payments, pent up demand, a temporary boost to real incomes – that are now fading. We expect UK consumer spending and GDP growth to moderate in 1H14.”

Richard Lowe, Head of Retail & Wholesale at Barclays, said: “Today’s year on year figures are surprisingly high, as December proved to be a mixed bag for retailers and there were winners and losers on the high street. Shoppers left it until the last minute to snap up their Christmas presents, no doubt hoping that further discounting would take place. When consumers started spending, many chose to trade up or down when it came to food purchases, with discount and premium supermarkets faring better than the mid-range stores. Looking ahead at 2014, I expect to see low levels of sustained growth, and cautious optimism from retailers.”

Peter Aykens, managing director at advisory firm CEB, said: “It’s clear that stronger economic conditions in the UK are having a positive effect on consumer spending. Our research shows that confidence in personal finances has hit a two-year high in Europe, with those relying on savings to pay off bills dropping to 23 per cent, a 6 per cent drop from last year. The UK, alongside Belgium and Italy, has also seen the biggest lift in sentiment within Europe.”

“Although some of the major retail players saw a slide in festive sales, should this optimism about savings and debt continue, it could lend support to a sustained recovery in the retail sector in 2014.”

Published on Friday 17 January by Editorial Assistant

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