Pre-VAT increase fails to help high street sales

Oct 23 2009 by Graeme Brown, Birmingham Post

An expected rise in high street sales ahead of January’s VAT increase failed to materialise last month as official figures revealed flat sales between August and September.

The Office for National Statistics (ONS) data showed the second month in a row of zero growth in retail sales volumes.

Experts had expected sales to rise by 0.5 per cent as they predicted an early seasonal rush by shoppers to avoid the Government’s move to increase VAT back to 17.5 per cent from the temporary reduction to 15 per cent.

On a year-on-year basis, the ONS said sales volumes rose 2.4 per cent but economists described the monthly result as “disappointing”.

A 0.1 per cent drop in food store sales offset rises elsewhere in the sector.

Non-food shop sales were flat compared with August, despite a 0.5 per cent fall in sales of clothes and footwear.

Retailers offering other goods and repair services enjoyed 0.9 per cent growth as the recession-fuelled trend to “make-do and mend” continued.

There was a further revival for shops selling electricals and furniture, with the household goods sector notching up a 3.3 per cent rise in sales for three-month figures to the end of September – the largest increase since June 2006.

By value, total sales rose by 1.8 per cent year-on-year in September and the ONS estimated that retail prices were 0.5 per cent lower than a year earlier.

Food inflation also eased from near eight per cent last September to less than two per cent last month, it added.

Howard Archer, at IHS Global Insight, said the monthly sales result “reinforces suspicion that consumers still need significant encouragement to put their hands in their pockets.”