Retail sales volume rose in the early part of January but store chiefs expect the pace of growth to slow.

Almost two thirds of retailers – 61% - reported a rise in volume in the two weeks from January 4, the date when VAT went up to 20%.

Over the same period 24% reported a fall, the CBI Distributive Trades Survey showed.

The resulting balance of +37% compared to +56% in December, and on a three-month basis was unchanged at +45%.

Grocers, fashion and footwear retailers enjoyed the strongest growth while sales of durable household goods fell “particularly sharply.

CBI chief economic adviser Ian McCafferty said: “The lure of seasonal Sales and discounting may have helped mitigate some of the impact of the VAT increase on volumes.

“However, retailers expect the pace of growth to slow further next month and orders placed with suppliers have flattened out.

“Consumer demand is expected to be weak in the coming months as the spending power of households is hit by a combination of sharply rising prices and weak wage growth. Retailers can expect a challenging period ahead.”

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