December retail sales rise 0.6%

20 January 2012 Last updated at 10:36 GMT Retail analyst Natalie Berg says "December provided a much needed boost for retailers"

UK retail sales volumes rose by 0.6% between November and December, official figures show, after heavy discounting by stores.

The Office for National Statistics (ONS) also said that sales were 2.6% higher than December 2010.

The November's figure was revised down to show a fall of 0.5%, rather than the 0.4% originally estimated.

Retailers, including Marks and Spencer, have said that they marked prices down sharply in the run-up to Christmas.

The increase in the volume of sales removes the effect of inflation.

The figures are also seasonally adjusted to try to counter the annual upwards bounce caused by the Christmas spending spree.

The sales rise in December was largely driven by clothing and footwear sales, which was 6.3% higher compared with a year ago.

But spending on household goods was 2.4% below last year's levels, the biggest drop since April 2010.

Administration Continue reading the main story Hugh Pym Chief economics correspondent, BBC News

So Christmas turned out alright in the end, despite retailers' fears in the autumn.

It's quite possible that shoppers were only persuaded to spend more because of heavy price discounting and that will have dented profits.

However the official retail sales figures suggest the consumer economy was holding up at the end of 2011.

The underlying growth in retail sales volumes (over three months to December) was 1.1%, the highest since August 2010. That figure will feed directly into the much anticipated economic output (GDP) number for the final quarter of 2011, due out next week.

And some analysts think that on the basis of the retail data it's a little more likely GDP was flat or grew slightly.

Christmas trading was a mixed bag for retailers, with Debenhams reporting flat sales. But High Street electronics and entertainment retailers, including Dixons, Comet, HMV and Game, reported sharp annual falls in sales, as did supermarket chain Tesco.

Chains including fashion retailer Peacocks, lingerie firm La Senza and outdoor specialist Blacks Leisure fared worse and are now in administration.

Howard Archer, from IHS Global Insight, said the figures provided some hopes that the UK economy grew in the last three months of 2011: "The 0.6% increase in retail sales volumes in December boosts hopes that the economy avoided contraction in the fourth quarter of 2011."

But he added that sales could have been boosted by opportunistic spending.

"The risk remains that pressurised and worried consumers will put away their purses and wallets and hunker down for an extended period, after a late flurry of spending in the run-up to Christmas and then taking advantage of the best of the bargains in the clearance sales."

Richard Barwell, from RBS said the data suggested inflation had further to fall, something the Bank of England has been predicting would happen.

"We thought that [sales] volumes would be supported by heavy discounting and that is broadly what we are seeing - firms are being squeezed, they are cutting prices," he said.

"The good news is around inflation. We think finally the Bank [of England] is going to be validated on inflation."

The official inflation figures out earlier this week showed a fall in the Consumer Prices Index from 4.8% to 4.2%.