Commenting on the retail sales figures for January published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:
“The strong rebound in January’s retail sales shows that the economy is recovering and spending is rising, despite the VAT increase at the beginning of the year. However, the downward revision in the December figure suggests that the impact of the severe weather last month was even worse than previously thought. In general terms, these figures support our view that GDP will show positive growth in the first quarter of 2011 after the decline in the last quarter.
“But the overall pace of recovery is modest and there is no room for any complacency. The economy is still facing risks as the Government implements measures to reduce the deficit. Pressures facing businesses and consumers will intensify in the months ahead, and with wages increasing slower than prices, disposable incomes will be squeezed further.
“Given this background, we believe that the MPC should postpone interest rate increases for a few more months until the initial impact of the austerity programme is absorbed. But keeping rates low is not enough. The Government must use the forthcoming Budget to create conditions where retailers and other businesses can grow and recruit new staff.”