Surprise jump in Christmas sales

Rising prices could prompt another rate hike

Retail sales experienced a strong rise in December, confounding expectations of a poor Christmas, figures show.

Sales experienced their biggest monthly increase since June 2005, rising 1.1% from November, the Office for National Statistics (ONS) said.

The monthly increase - which was sharply higher than forecasts of a 0.5% rise - took the annual rate up to 3.7%.

Price cuts were not necessary to drive sales as prices were up 0.2% compared with the same time last year.

Mixed fortunes

Analysts said news that prices had climbed for the fourth month in a row - the longest run of consecutive rises since April 1999 - could lead to further rate increases as the Bank of England tries to rein in inflation.

Recent data showed that consumer price inflation surged to 11 year highs of 3% during December.

The Bank has also raised concerns about the continued strength of the housing market as mortgage lending remains at record highs.

"I rather suspect these December figures were a bit of a one-off ... but it's clearly supporting the call for higher rates," said Commerzbank economist Peter Dixon.

Many experts had warned of a poor trading environment in the run-up to Christmas, as shoppers failed to hit the High Streets.

Towards the end of December, analysts Footfall said the number of shoppers visiting the High Street was down 9% on last year.

However, sales improved as shoppers splurged on presents, food and drink just days ahead of Christmas, while online sales jumped to record levels.

Retailers have also had a mixed festive season with sales dropping at Woolworths and HMV, while Tesco and John Lewis performed well.