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UK retail sales and services sector activity on the rise

Two separate surveys released today provide evidence that the British economy is starting to grow again.

They reveal that retail sales and the hugely important services sector both expanded in the first month of the new year, despite heavy snow in the middle of the month.

The British Retail Consortium (BRC) has said that retail sales increased by 1.9% in January on a like-for-like basis, compared with the same month last year. This is the biggest year-on-year rise since December 2011.

On a total basis, sales were up 3.0% – the highest total sales growth since September 2012. The popularity of Internet shopping continued to rise last month, with online sales growing by 10.1% compared to January 2012.

The director general of the BRC, Helen Dickinson, said that offers and promotions tempted consumers to spend their cash but shoppers also treated themselves to full-price and premium products early in January, particularly technology items. Coupled with recovering consumer confidence, this resulted in a more successful January than last year.

Nevertheless, the start of the year saw HMV, Blockbuster and Jessops all entering administration and 2013 is anticipated to be a tough year for the retail sector.

Meanwhile, Britain’s dominant services sector returned to growth last month. The latest purchasing managers’ index (PMI), compiled by the Chartered Institute of Purchasing & Supply (CIPS) and financial information services firm Markit, shows a modest rise in activity and new business following December’s first fall in activity for two years.

In the latest Markit/CIPS UK Services PMI, the headline seasonally adjusted Business Activity Index stood at 51.5, from 48.9 in December, rising back above the 50.0 mark which separates growth from contraction.

Panellists reported an underlying improvement in demand and better market confidence, the report said.

According to Chris Williamson, chief economist at Markit, the return to growth of the service sector in January “greatly reduces the likelihood of the UK falling back into a ‘triple-dip’ recession.”

The UK economy contracted in the fourth quarter of 2012 after just one quarter of growth, so all economic indicators for the first quarter of 2013 will be closely watched for any signs of ongoing weakness.


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