Retail spending rebounds in January after weak Christmas

"The improvement suggests that many shoppers delayed spending before Christmas and instead waited for deeper January discounts. Helen Dickinson, chief executive of the BRC, said: "A drab December gave way to a brighter January as retail sales picked up pace. Many shoppers had held off Christmas spending and waited for the January sales, with the start of the new year showing the strongest growth.""

"Linda Ellett, UK head of consumer, retail and leisure at KPMG, said discounting proved decisive. "January sales enticed consumers to spend, with personal electronics, furniture, and children's clothes and toys among the best-performing categories," she said. She added that New Year resolutions had also driven spending in health-related categories, including wellness-focused food and drink. Food sales rose by 3.8 per cent compared with January last year, up from annual growth of 2.8 per cent previously. Non-food sales increased by 1.7 per cent year-on-year."

"However, the data will provide limited comfort to retailers concerned about margins. The reliance on heavy discounting to stimulate demand suggests that underlying consumer confidence remains fragile. According to the Office for National Statistics, retail sales volumes are still 1.5 per cent below pre-pandemic levels. Official figures showed sales rose by only 0.4 per cent in December. Consumer spending is a major driver of UK economic growth, and weakness in retail demand has weighed on GDP since the pandemic."

Retail sales increased by 2.7% year-on-year in January, up from 1.2% in December, driven by post-Christmas and January sale spending. Consumers delayed purchases before Christmas and responded to heavy discounting, boosting categories such as personal electronics, furniture, children's clothes, toys, and wellness-related food and drink. Food sales rose 3.8% year-on-year and non-food sales rose 1.7%. Reliance on deep discounts underlines fragile underlying consumer confidence and squeezes retailer margins. Retail sales volumes remain 1.5% below pre-pandemic levels, and official figures showed only 0.4% growth in December. Weak retail demand continues to weigh on UK GDP.

Read at Business Matters