January spending boost takes economists by surprise

DESPITE City predictions of a 0.4 per cent fall in high street activity in January, data published today shows retail sales actually rose by 0.9 per cent.

According to the Office for National Statistics, the biggest increase in sales was seen in department stores, supermarkets and online. Aggressive discounting is thought to have encouraged more people to part with their cash, with the largest rise in sportswear.

Analysts had thought consumers would tighten the purse-strings after Christmas against a backdrop of high inflation and unemployment. But instead they saw the first back-to-back increases for December and January in eight years.

"I honestly thought this figure was a misprint when it came through," one economist told The Daily Telegraph.

The positive sales figures support the Confederation of British Industry's prediction that the UK economy will grow in the next quarter, avoiding a double-dip recession previously forecast by other observers.

Richard Driver, an analyst for Caxton FX, said the figure was "staggeringly strong and has caught the market completely offside". "On the back of December's strong retail sales growth, this represents an excellent start to the year," he said.

Others were not so optimistic. Samuel Tombs, an economist at Capital Economics, told The Financial Times that the figures may not give a true reflection of conditions on the high street.

He explained: "January's strong growth goes against the much more pessimistic picture painted by anecdotal evidence and all of the retail surveys."

A study of Britain's 500 biggest retailers published today illustrates his point. The survey, carried out by PwC, found that an average of 14 town-centre chain stores are closing every day. Menswear, books, electronics and holiday retailers were the hardest hit, while there was a surge in pound shops, charity shops, credit unions and supermarkets.

A rise in online sales and the collapse of several major retailers has left some high streets with 30 per cent vacancy rates. ·