RETAIL sales rose unexpectedly in December as shoppers flocked to supermarkets and bought more fuel on the back of falling oil prices.
Economists had expected sales to be weaker after consumers took advantage in November of the country’s first major round of US-style Black Friday sales.
But retail sales volumes rose 0.4 per cent on the month after surging by 1.6 per cent in November, the strongest growth in more than a decade, prompting hopes that the economic recovery is stepping up a pace.
Sales rose 4.3 per cent in December compared with the same month a year ago, according to official data from the ONS.
Economists had expected a fall of 0.6 per cent on the month, after the Black Friday sales brought forward some Christmas shopping into November, and a gain of 3.0 per cent on the year.
Dr Howard Archer, chief European & UK economist at IHS Economics, said: “These figures suggest that consumer spending made a very healthy contribution to GDP growth in the fourth quarter, boosting the chances that it came in close to the 0.7 per cent quarter-on-quarter rate achieved in the third quarter.“
He added the data suggests that retailers generally had a “very decent“ Christmas, although much will depend on how discounting and promotions hit margins.
Retailers slashed prices in December in a bid to lure back shoppers, but the pick-up bodes well for consumer spending.
“The prospects for retail sales and consumer spending overall for 2015 currently look bright,” said Dr Archer.
“Households’ purchasing power is currently getting a double leg-up from extremely low inflation as well as earnings growth finally picking up and there should be more to come over the coming months, along with further rises in employment.
“Consequently, households should finally see an appreciable rise in purchasing power in 2015.”
In the three months to December, sales jumped 5.0 per cent from the same period a year earlier, the biggest increase in more than 10 years.
Consumer spending has driven the strong economic recovery and it is likely to remain its main engine as demand for exports remains weak due to the slowdown in the eurozone.
Wages are showing some signs of recovery after growing by less than inflation for much of the period since the financial crisis, and consumer prices are barely rising, boding well for spending power this year.
The buoyant mood amongst consumers could also help Prime Minister David Cameron in the general election in May.
The December data showed signs that Black Friday did hit Christmas sales. Department stores said sales volumes fell by 4.5 per cent on the month, the worst performance since January 1996.