British retail sales rebound to post highest monthly increase since April


Demand for fuel and home improvement items helped retail sales in the UK rebound more than expected in January to post the largest monthly increase since the reopening of non-essential stores last April.

The volume of retail sales grew 1.9 per cent between December and January, after the previous month’s figure was revised down to a 4 per cent contraction, data from the Office for National Statistics on Friday showed.

That was almost double the 1 per cent expansion forecast by economists polled by Reuters, pointing to a stronger-than-expected rebound from the impact of surging infections from the Omicron coronavirus variant in December.

Neil Birrell, chief investment officer at Premier Mitton, said it was “likely that this will help convince the Bank of England that the recovery will be able to cope with more interest rate rises, probably coming next in March”.

Compared with February 2020, before the first Covid-19 restrictions, overall retail sales were up 3.6 per cent.

British retail sales returned to growth in January

Darren Morgan, ONS director of economic statistics, said January was particularly “a good month” for garden centers, department stores and household goods outlets.

Sales in both department stores and household goods shops rose 7 per cent in January compared to the previous month, boosted by 17 per cent growth in furniture and lighting stores and a 16 per cent expansion in electrical goods stores.

Susannah Streeter, senior investment analyst at Hargreaves Lansdown, the financial services company, said consumers appeared to be “shrugging off” the mounting cost of the living crisis.

“After having spent many more days confined to home due to infections and the mass cancellation of events in December, there was clearly an urge to revamp rooms and add back some sparkle in the dull days of January,” she added.

Automotive fuel sales volumes rose 4 per cent in January, following a 5 per cent fall in December when increased homeworking decreased travel.

In contrast, food sales dropped 2.3 per cent in January and fell below their pre-pandemic level for the first time as more people returned to eating out. Clothing sales fell 5 per cent and were 13 per cent below their February 2020 level.

As anxiety about visiting physical stores declined, the proportion of retail purchases made online fell to 25 per cent in January, its lowest since March 2020. Yet, this was still higher than the 20 per cent recorded in February 2020 before the pandemic.

However, economists warned that the data were boosted by December’s fall and by the difficulties in accounting for seasonality patterns that have been disrupted during the pandemic. Analysts also flagged mounting risks for the consumer sector due to higher inflation, rising taxes and surging energy costs.

“Despite the recovery in January, sales volumes were still 0.5 per cent below their fourth quarter 2021 average,” said Samuel Tombs, an economist at Pantheon Macroeconomics.

Lisa Hooker, consumer markets leader at advisory services group PwC, said care needed to be taken in reading “too much” into the headline figures. “What is certain is that the triple squeeze of the cost of living increases, tax rises and interest rate hikes are for the most part yet to hit consumers’ wallets,” she said.



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