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Unexpected rise in consumer spending

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Official figures have shown that retail sales rose during January.

Compared with December total high street sales climbed by 0.7 per cent, the Office for National Statistics has said.

Compared with a year ago, sales were up by 3.6 per cent. Taken on a quarterly basis, the three months to the end of January also registered an improvement with sales increasing by 3.2 per cent.

The figures confirmed data from the British Retail Consortium (BRC) which also showed retail sales on the rise during January. The BRC said that retail sales values last month rose 1.1 per cent on a like-for-like basis and 3.2 per cent on a total basis from January 2008.

However, market observers have warned that the unexpected rise does not necessarily herald a recovery.

Many shoppers were enticed by the January sales, and high street spending is not predicted to continue at the same level.

Vicky Redwood of Capital Economics said: “Anecdotal evidence suggests that January spending started off very strong, but then tailed off as the clearance sales ended. Meanwhile, rising unemployment and further falls in house prices will mean that households save any money freed up by falling inflation.”

But while acknowledging the role played by particularly heavy price competition, David Kern, chief economist at the British Chambers of Commerce, saw some room for hope.

Mr Kern said: “These better than expected retail sales figures may still be distorted by heavy end of year discounting. Nevertheless, they show a possible resilience in consumer spending which needs to be nurtured.

“The underlying recession remains serious and without continued corrective action there is a risk that any improvement will fizzle out.”