Sales figures for December bettered expectations after it emerged retailers enjoyed their best Christmas in four years.
The British Retail Consortium and accountants KPMG said today like-for-like sales showed a 2.6 per cent improvement on the lacklustre performance of a year earlier, helped by heavy trade in the week before Christmas and a bright first two days of the sales season.
Food sales remained buoyant in the festive period while clothing and footwear struggled and sales of electrical and electronic items were slightly down year-on-year, albeit at a better level than previous months.
Despite the biggest overall monthly sales gain since May 2004, the BRC warned that prospects for retailers in 2006 remained challenging with underlying conditions described as "still very tough".
Expectations in the run up to Christmas had been poor with retailers averaging a 0.4 per cent fall in like-for-like sales across 2005, the BRC added.
But the timing of Christmas offered traders an extra day in Christmas week while more shops opened on Boxing Day than last year, when it fell on a Sunday.
There remained evidence that shoppers were still value-conscious and keen to take advantage of widespread promotions and sales discounts.
Kevin Hawkins, BRC director general, said the figures were "significantly better" than most forecasters were expecting.
He added: "Underlying conditions, however, are still very tough and the first quarter of 2006 looks challenging, despite being up against weak comparatives in 2005."
John Lamb, spokesman for Birmingham Chamber of Commerce and Industry, welcomed the figures - and said the evidence pointed towards Birmingham having a good retail December.
He said: "We knew Birmingham seemed to have got it right and looked to be pulling in a lot of people, with the wheel, the ice rink and the Frankfurt Market. Although the national figures may be higher than expected, we'd expect Birmingham's performance to be right up there."
Yesterday John Lewis said it had been encouraged by its performance over Christmas with like-for-like sales growth of 7.1 per cent at its department stores and 6.2 per cent at Waitrose.
Over the period fashion sales lifted 6.4 per cent with electricals and home technology ahead 26 per cent and home gifts 1.8 per cent stronger than a year ago.