Retailers in Great Britain enjoyed the strongest rebound in monthly sales in almost three years in January as people returned to the shops after a slump in Christmas shopping.
Sales rose by 3.4% last month, the biggest monthly increase since April 2021, as all retail sectors except clothing stores experienced gains, providing welcome relief after dire Christmas trading, according to the Office for National Statistics (ONS). Supermarkets had a good month, as did sports shops and department stores.
Retail sales in the crucial festive season fell by more than initially estimated, after the ONS revised a 3.2% monthly decline in December to 3.3%, the biggest fall since shops were forced to close during the Covid pandemic in 2021.
The better-than-expected retail sales data comes a day after official figures showed the UK fell into a recession, at the end of last year, dealing a blow to Rishi Sunak and his pledge to grow the economy.
The economy shrank by 0.3% in the final three months of 2023, after shrinking by 0.1% in the previous three months, meeting the definition of a technical recession – two successive quarters of falling gross domestic product.
However, Andrew Bailey, the governor of the Bank of England, downplayed the significance of the quarterly GDP figures, suggesting there were signs of an upturn in the economy that would become clearer in the months ahead.
Responding to the figures showing the UK was in recession, the chancellor, Jeremy Hunt, said on Thursday the battle to tame the rate of inflation meant the economy was always going to enter low-growth mode, adding that the economy “is turning a corner”.
However, despite the increase in sales in January, the ONS said inflation-fuelled price rises meant consumers spent more for less, with the rise in the amount spent increasing 3.9% month on month but the volume of goods sold climbing up at a lower 3.4%.
“Sales increased across nearly all retail sectors, and it was a particularly strong month for supermarkets,” said Heather Bovill, a deputy director at the ONS. “Household goods stores, sports shops and department store retailers were among those reporting robust trading due to January sales promotions. A fall in prices at the pump also meant a solid month for fuel sales.”
Department stores and other non-food shops, such as retailers of sports equipment, games and toys, watches and jewellery, were the biggest winners, reporting monthly sales increases of 5.4% and 6.2% respectively.
This was partly because of retailers in these sectors reporting the worst trading figures last month, with department store sales slumping 7.1% and other non-food stores sales down 4.5% in December.
Sales rose 1.8%in household goods stores in January, mainly because of a boost at hardware shops.
Clothing was the only retail sector with a continued decline in sales, which fell 1.4% month on month in January after a 1.5% fall in December.
Supermarkets and food stores also reported strong trading, with month-on-month sales rising 3.4% in January, recovering from a record 3.1% in December when consumers cut back on festive spending.
The ONS said the December slump and January bounceback was mainly because of the performance of supermarkets.
Non-food shops – including department stores, clothing and household outlets combined – achieved a 3% monthly sales increase after falling 3.9% in December.
Sales of fuel increased at 5.4% month on month in January as consumers took advantage of falling prices at the pump.
Samantha Phillips, a partner at McKinsey & Company, said: “Household budgets will remain under pressure, and discerning consumers will remain mindful about where they hold back spending and where they splurge.
“Retailers may have to find new ways to appeal to consumers in a recessionary environment. With tactical cost savings mostly exhausted, they will likely focus on share growth, while looking at fundamental business model shifts such as gen AI opportunities and data and loyalty programmes.”
