UK retail sales rebounded dramatically in January after a disastrous December, in a rare piece of good news for Rishi Sunak that offers hope the UK’s recession will be among the smallest in history.
Retail sales volumes grew by 3.4% during the month, the fastest increase since April 2021’s post-Covid reopening, and blowing economists’ expectations of a 1.9% rise out of the water.
That comes after an extremely disappointing December in which sales fell by 3.2%, which itself was the worst fall since the pandemic. The plunge in sales that month helped put the UK in recession at the end of 2023, as official figures revealed yesterday.
January’s improvement will be a boost to the Prime Minister’s attempts to convince the public that the economy has now “turned a corner” as a general election looms. If the economy can grow over the first three months of the year, the UK will exit recession in the fastest possible time frame, and the 2023 slump would rival the 1956's decline for the title of the smallest recession in British history.
Joe Maher, assistant economist at Capital Economics, said: “The 3.4% month-on-month rebound in retail sales volumes in January will put an end to the retail recession and perhaps even to the wider economy recession in Q1.
“The strong pick up in sales suggests the worst is now behind the retail sector and falling inflation and rising wages in 2024 will provide a strong platform for recovery.
“Overall, today’s release was stronger than expected and suggests the drag from higher interest rates on consumer spending is fading fast and points to the economy soon moving out of recession. As a result, after a depressing 2023 for retailers, a better year should be in store in 2024.”
The biggest contributor to the growth was supermarkets, as shoppers took advantage of the first month-on-month fall in food prices since 2021. But the recovery was broad, with growth in every sector except clothing.
However, the rebound means sales figures are still only back to where they were in November, and still 1.3% below pre-pandemic.
Heather Bovill, deputy director for Surveys and Economic Indicators at the ONS, said: “After a very weak December, retail sales rebounded in January with the largest monthly rise since April 2021. This means that overall sales have now recovered to pre-December levels, although if we look at the broader picture, they are still below where they were pre-pandemic.”
