Shoppers send retailers mixed signals

Figures from the Office of National Statistics revealed 0.5 per cent growth in high street sales in October compared with the month before – a figure higher than analysts’ expectations. It followed two straight months of declines.

But the annualized figure was less rosy, with sales contracting by 0.1 per cent. It was the first slippage in annual sales since the beginning of 2010.

Analysts labeled the figures “unspectacular”, but suggested they could have been worse. They pointed to the pending increase in the top rate of VAT – from 17.5 per cent to 20 per cent – as a motivating factor sending people to the shops.
 
Howard Archer, chief European economist at IHS Insight, said "It is likely that retail sales will benefit to a limited extent in the final weeks of this year from consumers looking to make purchases of more expensive items ahead of the January VAT increase.

He added: "Retailers will also be fervently hoping that consumers decide to splash out and have a good Christmas despite their worries and uncertainties over the economic outlook."

British Retail Consortium director general Stephen Robertson offered a gloomier assessment, suggesting that shop sales, particularly on non-essential items, would continue to be weak.

“Retailers are being squeezed as they use heavy discounting and promotions to tempt wary shoppers into spending their limited spare cash,” he said.

"This meagre growth is likely to continue in the run-up to Christmas. Then 2011 will continue to be difficult as VAT and National Insurance rise and the impact of public sector job cuts is felt."