Survey results published on Tuesday showed retail sales rebounded in January, suggesting that the economy may be gathering steam after a shock contraction late last year.
Like-for-like sales grew by 2.3 percent January over the last same period last year and strongest since March 2010, the British Retail Consortium (BRC) reported. Total sales grew by 4.2 percent in January compared to 1.5 percent in December.
However, the trade body said the rise was due to the big discount offered by retailers in the New Year and the rush to beat the hike in VAT.
Stephen Robertson – the Director General of BRC said: “Comparisons are with a feeble, snow-hit performance a year ago”, referring to the snow hit weak January numbers of 2010.
“Growth this January was driven by a relatively short but strong burst of non-food buying early in the month”, he said.
The government had blamed bad weather in December 2010 for the contraction of economy and heavy snow was blamed for the 0.3 percent growth in sales.
A separate survey showed that house prices fell in January for the third straight month although the rate of fall slowed down.
The seasonally adjusted house price jumped to –31 in January from –39 in December, against the forecasted –38 and the highest since last July’s number.
The growth in recovery shows the fine balance the Bank of England needs to maintain to make sure it curbs inflation without hiking interest rates that may derail the delicate recovery process.
Economists believe that the central bank will not raise interest rates in its scheduled meeting on Thursday and rates will remain at their record low of 0.5 percent till the end of this year to ensure that the economic growth is sustained.
Prime Minister David Cameron has ruled out any tax incentive for the households despite pressures in next month’s budget session.
The government has said that it must keep deficit under control to boost investor confidence and ensure that it is able to borrow at a lower rate. The government is scheduled to raise £1 billion worth index linked gilt today through auction.