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ONS figures show heavy discounting helped sales volumes rise

UK retail sales volumes rose in December at the fastest monthly pace since February 2010, official figures have revealed, although the data signalled heavy discounting to tempt customers.

Seasonally adjusted figures published yesterday by the Office for National Statistics showed UK retail sales volumes leapt by 2.6% month-on-month to December. And volumes last month were up 5.3% on the same month of 2012 - the fastest year-on-year pace of increase since October 2004.

The 2.6% monthly rise in December was much greater than the 0.4% increase forecast by the City. And the strong ONS figures contrasted with a survey from the British Retail Consortium earlier this month. The BRC survey showed the year-on-year growth in the value of UK retail sales slowed last month to its weakest pace since December 2012.

Figures this week from the Scottish Retail Consortium showed the value of retail sales north of the Border in December was down 1.1% year-on-year, a much weaker showing than that in the UK as a whole. According to the BRC, UK retail sales value in December was up 1.8% on a year earlier.

The surge in retail sales volumes in December, on the ONS measure, followed weak showings in the previous two months. Sales volumes fell 0.9% month-on-month in October, and edged up by only 0.1% in November.

The ONS figures showed a 2.8% month-on-month rise in non-food sales volumes in December. Food sales rose 2.4% between November and December.

In the non-specialised category, which takes in department stores, sales volumes leapt 8.7% month-on-month in December. But clothing, footwear and textiles stores recorded only a 0.1% month-on-month rise in sales volumes.

The deflator in the ONS figures provided further evidence of heavy discounting by retailers in December. Excluding automotive fuel, the ONS's deflator signals that prices in December were 0.7% higher than in the same month of 2012. In November, the deflator had signalled prices were up 1% year-on-year.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "Retail sales volumes jumped 2.6% month-on-month and 5.3% year-on-year in December, which was way above expectations and a much stronger performance than had seemed likely given a far-from-spectacular December survey from the British Retail Consortium and somewhat mixed reports from individual retailers.

"The surge in retail sales in December, following a muted overall performance in November and October indicates that consumers left much of their Christmas spending late in the hope of getting better late deals from retailers. It also implies that spending was strong at the start of the clearance sales, as squeezed consumers looked to take advantage of genuine bargains."

Mr Archer believed the strong December sales performance provided a boost to hopes that UK gross domestic product growth in the final three months of 2013 would have remained around the 0.8% quarter-on-quarter rate achieved in both the third and second quarters.

However, he added: "It is notable that the year-on-year increase in the retail sales price deflator excluding petrol slowed to 0.7% in December from 1.0% in November, indicating that retailers were more aggressive in their discounting and promotions as they tried to get consumers to part with their cash.

"This will obviously have hit many retailers' margins significantly."

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