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Retail

UK Retail Sales Bounce As Shoppers Flock To January Sales

British retail sales rebounded strongly in January as steep clothing discounts attracted wary shoppers, bucking a slowdown in consumer spending ahead of Brexit.

Retail sales volumes jumped by a monthly 1.0% after their biggest fall in December in a year-and-a-half, the Office for National Statistics (ONS) said, far above the median forecast in a Reuters poll of economists for a 0.2% rise.

Compared with a year ago, retail sales were 4.2% higher in January, the biggest annual rise since December 2016 and again outstripping almost all forecasts in the poll.

Sterling edged a little higher against the dollar on the back of the figures.

The Big Picture

Philipp Gutzwiller, head of retail at Lloyds Bank Commercial Banking, said Friday's data were "undoubtedly a positive" although the big picture remained one of cautious spending.

"There's a big difference between tempting shoppers with bargains and persuading them to keep buying once January's discounts and New Year's resolution purchases are over though," he added.

The ONS said clothing sales grew strongly thanks to the biggest cuts in annual terms since August 2016. Food sales also grew after a slight dip over the Christmas period.

Consumer Spending

Britain's economy slowed sharply in the last few months of 2018 but Friday's data suggested that consumer spending remains resilient, even if other parts of the economy like manufacturing are struggling ahead of Britain's departure from the European Union.

Brexit is due on March 29 but there is no clarity yet on whether Britain can leave with a transition deal, something that has hammered business investment.

Looking at the three months to January compared with a year ago, which smooths out some monthly volatility, retail sales growth picked up to a six-month high of 3.5% from 2.9% in December.

Clothing sales on this measure grew by the largest volume since September 2017.

Partial Recovery

Friday's data chimed with other signs that consumer spending may have recovered partially from a slowdown late last year, when households tightened their belts after splashing out during a hot summer and the soccer World Cup.

A recent survey from the British Retail Consortium showed shops enjoyed the fastest sales growth in seven months - a bit of relief after their worst Christmas in a decade.

There has also been some comfort for consumers in recent data which has shown the fastest growth in underlying pay since 2008 and inflation falling to a two-year low of 1.8%.

The measure of inflation used in the retail sales data showed a 0.4% annual increase in January, the smallest rise since November 2016.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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