According to the Office for National Statistics (ONS), UK retail sales in January saw a surprising improvement, with volumes increasing by 0.5% compared to a decline of 1.2% in December. This growth brings sales volumes to just 1.4% below pre-Covid levels in February 2020. Non-food sales volumes also experienced a positive change, rising by 0.6% in January following a decrease of 2.5% in December. Online sales, in particular, performed well, with non-store sales volumes increasing by 2%, thanks in part to sales promotions.
Although the month-on-month figures are encouraging, the year-on-year comparisons present a less optimistic picture. The ONS reported that retail sales values only rose by 4.1% compared to the previous year, falling behind the rate of inflation. In terms of volumes, there was a 5.1% decline. Despite the overall positive performance, sales volumes still remain 2.9% below pre-pandemic levels.
In terms of specific categories, the ONS data revealed that “other” stores, including cosmetics, watches, and jewellery stores, experienced a monthly increase in sales volumes of 3.6%. Department stores also saw a slight recovery, with sales volumes rising by 0.8% in January after a 3.1% decline in December. Some retailers extended their sales from Christmas Eve through January, contributing to the overall growth.
The report suggests that while consumers are still willing to spend, their willingness is largely dependent on price discounts. Helen Dickinson, Chief Executive of the British Retail Consortium, expressed disappointment with the figures, highlighting that while widespread January sales helped maintain positive growth, consumers struggled to keep up with double-digit inflation rates. This has resulted in a decline in overall retail volumes, with consumers tightening their purse strings and opting for value brands, particularly for larger purchases.
Silvia Rindone, EY UK&I Retail Lead, added that although there was a marginal increase in retail sales volumes in January due to promotional activity, the bigger picture reveals a decline compared to the same period last year. Rising inflation and falling consumer confidence are likely to impact future figures. Recent Christmas trading updates from retailers reflect the challenging market conditions, as companies compete for a share of consumers’ limited budgets amidst rising costs and overheads.
Overall, while the January retail sales figures offer some encouragement, the UK retail sector continues to face numerous challenges. The industry must navigate the effects of inflation, consumer spending habits, and fierce competition for consumers’ limited budgets. The long-term impact of these challenges on the sector remains uncertain.
Useful links:
– ONS Retail Sales Report
– BRC News Article on January Retail Sales
