Fillip for retailers ahead of Christmas as sales rise

The high street received a pre-Christmas boost yesterday when sales volumes rose for the first time in three months in October after non-food retailers put on a growth spurt.

Economists and retailers said the figures showed that the recovery in spending had not "petered out yet," but warned of a "difficult" 2011, as VAT rises to 20 per cent on 4 January.

Sales volumes rose by 0.5 per cent between September and October, which was slightly ahead of a forecast 0.4 per cent rise, according to the Office of National Statistics (ONS). However, retail sales by value, which accounts for rising prices, only grew by 2.7 per cent in October, compared to the same month last year, and volumes fell 0.1 per cent on an annual basis.

Stephen Robertson, the director general of the British Retail Consortium, said the ONS data "chimes" with the trade body's most recent data. But he stressed: "This is weak growth and even weaker when you remember VAT is up on a year ago and inflation is running at more than 3 per cent."

Further evidence of tough trading on the high street came from Halfords, the bicycle-to-car parts accessories chain, which said yesterday that sales tumbled by 4.9 per cent for the 26 weeks to 1 October. The ONS said the star performers in October were non-specialist general merchandise retailers, which grew sales volumes by 1.6 per cent in October. Textile, clothing and footwear chains also enjoyed a good month by posting volumes higher by 0.6 per cent. Overall, primarily non-food retailers grew sales by 0.3 per cent, while the grocers were up by 0.1 per cent.

Mr Robertson said: "Food sales growth, propped up by inflationary pressure from rising commodity prices, is the driving force behind this modest increase in overall sales. Shaky consumer confidence continues to discourage spending, particularly on non- essential items.

"Retailers are being squeezed as they use heavy discounting and promotions to tempt wary shoppers into spending their limited spare cash." This view is illustrated by ONS data that show total sales volumes in the three months to October only edged up by 0.1 per cent, compared to the previous quarter. Samuel Tombs, the UK economist at Capital Economics, said: "The latest UK retail sales figures suggested that the consumer spending recovery, while a bit lacklustre, hasn't petered out yet."

Howard Archer, the chief European economist at IHS Global 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. 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."