January retail sales up 2.6 per cent

Shoppers took advantage of heavy discounting across UK High Streets last month, prompting fears that interest rates are unlikely to be cut in the near future.

According to the latest British Retail Consortium-KPMG Retail Sales Monitor, last month UK like-for-like retail sales rose 2.6 per cent compared with January 2007, when sales rose 3.1 per cent after a weak start to 2006.

Total sales were 4.0 per cent higher than last January.

However the Consortium said that sales last month were "discount driven" and that consumer confidence had fallen further.

"People are particularly wary of committing to major purchases and consumers continue to be very price sensitive," the BRC said.

Food sales picked up in January after slowing in December, while clothing sales were lower than a year ago for the fourth year in succession.

Stephen Robertson, the BRC's director general, said: "Following three months of weak year-on-year growth, this appears to be significantly better, but the figures don't mean consumer confidence is reviving yet."

Helen Dickinson, head of retail at KPMG, said: "While the 'doom-mongers' may be temporarily silenced by this month's results, it's certainly too early to draw any conclusions about how the rest of the year will pan out.

"The growth of 4.9 per cent in total and 2.6 per cent in like-for-like sales was heavily skewed by a strong performance in week one, as January sales absorbed demand carried over from a poor December, which then deteriorated as the month progressed."

The figures came as the Consumer Prices Index rose to 2.2 per cent last month, up from 2.1 per cent in December, higher than the government's own inflation target of two per cent.

The Retail Price Index, including mortgage payments, rose to 4.1 per cent in January, from four per cent in December.

Yesterday it was revealed that factory gate inflation was rising faster than at any time in the last 16 years.