Retail sales unexpectedly rose at their fastest pace since May in December, as retailers slashed prices to lure in shoppers, a survey by the Confederation of British Industry showed on Tuesday.
The CBI distributive trades survey's reported sales balance jumped to +9 from -19 in November, the highest since May. Analysts had expected a more modest improvement to -13.
However, retailers reckoned sales would fall sharply after Christmas, with the expected sales balance for January falling to -18, its weakest since August 2009.
Early discounting helped retailers add a little extra sparkle to their sales in December, although the reprieve appears to only be temporary, said Judith McKenna, chairwoman of the CBI's Distributive Trades panel.
Consumers are continuing to hold off on purchasing big-ticket items, including durable household goods, to use their hard-earned cash to stock-up for Christmas dinner and all-important gifts for the family.
The CBI said rise in sales volumes was driven by non-store sales, which includes internet retailers, where sales grew at their fastest pace since May 1998.
However, durable household goods sales fell at fastest pace since December 2008, while sales by grocers rose at the fastest pace since May.
Retailers have suffered for much of 2011 as Britons' incomes have been squeezed by rising prices, slow wage growth and government austerity measures.
Although British consumer confidence edged up last month from October's record low, it remained depressed by rising unemployment and high inflation, a survey from the Nationwide building society showed on Tuesday.
Recent results from retailers indicate that cash-strapped Britons are cutting back on hotel stays, switching from cars to public transport and avoiding home improvements. Even Whitbread, whose Costa Coffee chain and budget Premier Inn hotels had proved resilient during the downturn, reported a sharp slowing in sales growth last week, blaming the grim economic outlook.
However, some stores are bucking the trend. On Sunday John Lewis, Britain's biggest department store group which appeals to wealthier shoppers, said sales jumped more than 10 percent in the week to December 17, boosted by purchases of Christmas gifts and festive decorations.(Reporting by Olesya Dmitracova, writing by Fiona Shaikh)