Festive cheer on the high street

Retailers began to report their Christmas trading figures this week. Retail sales account for 6% of GDP and are a key gauge of overall consumption, which accounts for the lion's share of the economy.

John Lewis impressed analysts with a 7% year-on-year rise in sales for the five weeks to 28 December. Store sales gained only 1.2%, but online sales were up by over a fifth. House of Fraser posted a record Christmas. Debenhams, however, suffered weak Christmas trading, prompting a profit warning.

What the commentators said

Overall spending appears to have held up fairly well, however. Boxing Day saw a new record spending spree of £2.7bn and online sales that day jumped by an annual 40%. Consumer spending growth, buoyed by falling unemployment, the housing market recovery, and households dipping into their savings, could have reached its highest level since 2007 in 2013, according to Capital Economics. And there is scope for further improvement this year: real incomes should finally begin to rise as inflation subsides.

Here we go again a consumer-led rebound, said Allister Heath in City AM. The government forecasts that consumption will contribute 1.2% of the 1.4% growth likely for 2013, and half of this year's growth of 2.4%. Business investment and housebuilding are finally expected to improve this year, "but insufficiently".

Our current account or trade deficit is also a drag on growth. George Osborne has achieved growth, but its composition is not a sustainable basis on which to rebuild the economy.