RETAIL trade sales over the key December festive period were better than expected, rising at their fastest pace in nearly two years.

December’s 4.1% year-on-year increase follows a 3.8% rise in November, when retail sales also surprised on the upside.

Retail sales contribute significantly to gross domestic product, so the data released by Statistics SA on Wednesday — which also showed a 3.3% increase for the year compared with 2014 and a 3.8% rise for the December quarter — show the sector offered some support last year for an economy under strain.

Despite two months of upside surprises from the sector, wariness about its outlook remains. While it is supported by above-inflation salary increases for public servants, consumer confidence is low and rising interest rates are affecting consumer spending, Annabel Bishop of Invest noted. Retailers also pointed to high numbers of clients with problem accounts, she said.

The growth in December came mostly from small-ticket items, with general dealers and retailers in textiles, clothing, footwear and leather goods leading the gains. Consumers tend to reduce spending on big-ticket items when times get tough.

December’s pace of growth was the quickest since January 2014, when retail sales grew 4.9%.

FNB senior industry economist Jason Muscat, pointing to a 7.7% year-on-year increase at furniture retailers, said this was the first expansion for that sector in five months, and was probably boosted by faster credit expansion and anticipation of year-end bonuses.

Compared with November, sales fell 0.9% in December. Monthly data are volatile, however.