Sales for December 2004 fell 2.6 per cent, but last month they rose for the second consecutive month, following a four-month decline sparked by the July London bombings.
The three-month trend rate of growth went from a 1.2 per cent decrease in November to a 1.9 per cent increase in December.
Customer traffic also increased, with shoppers lured by the Sales. Cold weather boosted sales of clothing but homewares continued to struggle.
London sales outperformed UK sales in November and December, after four months of substantially larger declines than in UK sales.
LRC director Kevin Hawkins said the figures were encouraging. However, he added: 'We must bear in mind that this figure is up against a weak comparison of -2.6 in December 2004. Some sectors still struggled and, in many cases, growth was driven largely by discounting. Nevertheless, it appears trading in London is showing some signs of improvement, helped by initiatives such as Oxford Street's traffic-free festival day and a slight lift in consumer confidence as seen across the rest of the UK.'
KPMG head of retail Helen Dickinson said: 'The various initiatives in the capital to drive footfall and improve performance, including the closure of Oxford Street to traffic on one of the key Christmas trading days, appear to have had some impact. Many London retailers will be breathing a loud sigh of relief and have now moved into the sales period with much cleaner stock positions than at this time last year.'