UK Retail Sales Unexpectedly Recover In January

UK retail turnover rebounded unexpectedly in January driven by sales promotions, official data showed on Friday.

Despite higher inflation, retail sales grew 0.5 percent on a monthly basis in January, in contrast to the 1.2 percent decline in December and -0.6 percent in November, data from the Office for National Statistics revealed. Sales were expected to drop 0.3 percent.

Excluding auto fuel, retail sales expanded 0.4 percent, reversing December’s 1.4 percent decrease and economists’ forecast of nil growth.

Fall in food stores was offset by increase in other sectors. Food store sales declined 0.5 percent as customers buy less due to increased cost of living and food prices.

Meanwhile, automotive fuel sales gained 1.7 percent following a 0.3 percent rise in December as fuel prices continued to fall.

Likewise, non-food store sales increased 0.6 percent after falling 2.5 percent with feedback from retailers that growth was underpinned by sales promotions.

The ONS said retail sales volumes continued a downward trend since summer 2021 following the lifting of hospitality restrictions.

Sales volumes decreased 0.9 percent in the three months to January from the previous three months. On a yearly basis, sales fell 5.7 percent in three months ended January.

Year-on-year, retail sales were down 5.1 percent in January after easing 6.1 percent in the previous month. This was also slower than the expected decrease of 5.5 percent.

Excluding fuel, the decline in sales slowed to 5.3 percent, as expected, from 6.5 percent in December.

James Smith, an ING economist said January’s increase in retail sales was not enough to reverse a steep fall around Christmas, and the big picture is that sales have been on a downward trend.

Signs of discounting in January will be welcome news for the Bank of England, the economist added.

Data released earlier this month by the British Retail Consortium showed that retail sales grew at a slower pace of 3.9 percent in January as Christmas cheer subsided.

The BRC observed that discretionary spending will remain weak amid low consumer confidence and rising household bills and mortgages.

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