- David McCorquodale, Head of Retail at KPMG
UK retail sales surprised markets to the upside, posting an unexpectedly solid growth in December driven by a sharp increase in food sales amid cheaper fuel prices and ultra-low inflation. The Office for National Statistics showed, overall sales volumes rose 0.4% in December following the 1.6% surge in the preceding month, the fastest growth in more than a decade. Economists, however, had expected a 0.6% decline. Sales jumped 4.3% in the reported month compared with the previous year, after the last month's 6.4% annual increase. Sales excluding fuel climbed 0.2% against market predictions, while on an annual basis sales soared 4.2%. In the three months through December, a smoother gauge compared with the often volatile monthly changes, core sales advanced 5.0% from the same period in the previous year, the biggest increase in more than 10 years.
Consumer spending has ensured Britain's strong economic recovery which began in mid-2013 and is likely to remain its main engine as demand for exports is still weak due to the Euro zone's slowdown. Wages have started to show some signs of recovery after increasing by less than inflation for much of the period since the financial crisis, and consumer prices are barely growing, spurring spending power this year. The upbeat consumer mood could also provide a support to Prime Minister David Cameron, who is facing national elections in May.
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