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BRC-KPMG Retail Sales Monitor January

Discounts and rush to beat VAT rise help sales.

GENERAL MERCHANDISE

BRC-KPMG Retail Sales Monitor January

UK retail sales values were up 2.3% on a like-for-like basis from January 2010, when sales had fallen 0.7%. On a total basis, sales were 4.2% higher, against a 1.2% increase in January 2010.

Pent-up demand after December's snow, pre-VAT rise purchases and clearance bargains boosted non-food sales at the start of the month. Sales then fell back, hit by consumer caution. Food sales growth slowed as people had less need to buy, having stocked up during the snow.

Non-food non-store (internet, mail-order and phone) sales growth fell back in January after picking up in November and December. Sales were 12.3% higher than a year ago, less than the 18.0% in December.

Stephen Robertson, Director General, British Retail Consortium, said,"On the surface, this is the best sales growth since last March, but that's not the whole story. Comparisons are with a feeble, snow-hit performance a year ago. Growth this January was driven by a relatively short but strong burst of non-food buying early in the month. Clearance discounts and a last chance to beat the VAT rise got people buying things like furniture and electricals in the first few days.

"Later in the month sales of non-food goods slowed, particularly for bigger items, as the reality of worries about jobs and personal finances returned to customers' minds. Generally, food sales growth was modest as people used up stocks they'd bought-in during December's bad weather.

"Turning round consumer confidence is central to turning round the economy. A range of pressures is bearing down on customers. As it considers the Budget, the Government must not add any more."

Helen Dickinson, Head of Retail, KPMG, said,"January's results were heavily impacted by strong trading in the first week of 2011, against poor comparatives due to the snow at that time last year, while the remainder of the month was more indicative of the underlying trend of sales dipping in and out of negative territory across all sectors other than food. The divergence between food and non-food narrowed in January, partly due to the VAT rise, and interestingly it was the sectors that had been struggling over the previous quarter, including furniture, DIY and home-related areas that picked up more strongly than clothing.

"Falling disposable incomes will continue to exert pressure on sales in the first quarter of the year, traditionally the weakest period of trading as consumers cut back on spending post-Christmas."

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