The retail sector is hurting after a four percent drop in retail sales in January, which came on the heels of a poor December.

While overall sales in 2007 were up, thanks to double-digit increases in the early part of the year, 2008 has not started on a good note for shop owners.

December, which usually records the highest level of shopping year-round, saw the volume of sales drop 1.1 percent and January saw the volume of sales drop four percent. It was the first time sales had dropped in January in three years.

Kristi Grayston, co-chair of the Camber of Commerce's retail division, said there was much concern in the retail sector, particularly with talk of a US recession.

However, the Government released the National Economic Report of Bermuda last week, which stated gross turnover stood at $1.11 billion, a 3.4-percent increase over 2006, and added that the retail sector should remain strong this year.

The report, released by the Ministry of Finance, stated: "The fact that local and overseas retails sales as a whole continue to grow illustrates the significant levels of consumer spending in Bermuda's economy.

"As the economy grows and wages increase, consumers will have more disposable income to spend and statistics show that a sizeable percentage is spent on retail goods.

"As a result the retail sector in Bermuda should remain strong for the foreseeable future, not withstanding the lower than anticipated sales turnover in December." It went on to state that apparel stores recorded the largest year-over-year gain, 8.9 percent, while furniture and appliance stores saw sales rise 3.4 percent and residents spent 7.1 percent more shopping oversees.

Mrs. Grayston said: "With all due respect I don't think you can say the retail sector is doing fine. December sales can account for 30 percent of a stores total year-long sales and to have a weak December followed by a fall in sales in January is not good.

"A lot of people are hurting as a result.

"And I don't think you can say retail will remain strong. People are openly talking about how the US is now in a recession and when people start talking like that they don't spend as much."

She also pointed out that the jump in apparel sales came after two years of decline, with a 7.8-percent drop in 2005 and a nine-percent drop in sales in 2006 due to the closures of Smith's and Trimingham's.

"The jump in sales this year could account for Cooper's reopening," she said. "It does not mean that as a whole everyone was selling more."