UK retail sales grew in January in an unexpected sign of consumer resilience, as holiday discounts boosted online sales and fuel prices continued to fall, official data showed on Friday.
The volume of retail sales, or the amount of goods sold in UK shops, increased 0.5 per cent between December and January, following a revised 1.2 per cent drop in the previous month, according to the Office for National Statistics.
“The retail industry is entering a transitionary period as inflation eases and consumer confidence shows early signs of improvement,” said Oliver Vernon-Harcourt, head of retail at Deloitte.
The reading was above the 0.3 per cent fall forecasted by economists polled by Reuters, and marked a rebound in sales after two successive months of decline.
However, compared with January 2022, which is a less volatile measure, sales volumes were still down by 5.1 per cent, the tenth month in a row that they fell in annual terms.
Despite this drop, the value of retail sales — the amount of money that consumers spent — rose 4.1 per cent year on year, as higher prices meant that consumers could buy less with their money.
The annual rate of consumer price inflation fell to a five-month low of 10.1 per cent in January, the ONS said on Wednesday, retreating further from the 11.1 per cent peak in October.
“Consumers’ real incomes are likely to take a further hit over the next six months as inflation remains significantly higher than wages, more households are forced to remortgage at much higher rates and some government support is withdrawn”, said Thomas Pugh, economist at RSM UK.
“As such, we suspect retail sales will resume their downward trend in the first half of this year,” he added.
The month-on-month rise in overall sales volumes was driven by a 3.6 per cent rebound in “other stores”, pointing to strong growth in departments such as cosmetics, furniture and jewellery.
Sales volumes at non-store retailers, mostly online sellers that do not have a physical shop, went up 2 per cent in the month to January.
January promotions supported online sales, which have generally been declining since early 2021, when the UK economy reopened after Covid-19 lockdowns and people could return to shopping in stores.
Moreover, “in the latest month, as prices continue to fall at the pumps, fuel sales have risen”, said Darren Morgan, ONS director of economic statistics.
Fuel sales volumes rose 1.7 per cent in January, following an increase of 0.3 per cent in the previous month, as average fuel prices fell to their lowest level since February 2022.
Meanwhile food sales fell 0.5 per cent in the month to January, marking the fifth decline in seven months, as high grocery prices led people to cut back on the amount they bought.
“It is too soon to conclude that the retail sector is coming out of its funk and that the economy won’t yet fall into a recession”, said Paul Dales, chief UK economist at Capital Economics,
“The full drag on activity from higher interest rates has yet to be felt,” he added.
