A general view of a kiosk near Charing Cross station in London, England, on January 20, 2024. (Photo by Alberto Pezzali/NurPhoto via Getty Images)
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LONDON – Better-than-expected retail sales in January provided a bright spot for Britain’s struggling economy on Friday – and suggest the country’s recession will be short-lived, some economists say.
According to the Office for National Statistics, sales rose 3.4% since December, the strongest monthly increase since April 2021. Economists polled by Reuters had expected a more modest growth of 1.5%.
Sales volumes increased in all areas except closures, with grocery stores seeing the largest increase. According to the ONS, consumers “spent more for less” in January, with the total amount they paid increasing by 3.9%.
The latest figures follow news on Thursday that the UK economy entered a technical recession in the final quarter of 2023. Gross domestic product fell 0.3% after contracting 0.1% in the third quarter.
Sales during the key holiday trading period were far weaker than expected, with December seeing the biggest monthly decline since January 2021.
Meanwhile, UK retail sales remain 1.3% below their pre-pandemic levels in February 2020, according to the ONS.
The “strong increase in sales suggests the worst is now behind the retail sector and falling inflation and rising wages will provide a strong foundation for a recovery in 2024,” Joe Maher, associate economist at Capital Economics, said in a note .
The increase also suggests that consumer spending is slowing due to higher interest rates and the economy is emerging from recession, Maher said – but there is still a “long way to go to pre-pandemic highs for retailers.”
Kris Hamer, director of insight at the British Retail Consortium, said two months of higher sales volumes in the last three months were “promising” after 19 months of decline.
“Despite this, shoppers remained cautious as they entered the third year of high living costs,” Hamer said, adding that a rise in business rates and new border control costs would weigh on retailers.
Despite the poor growth numbers, the retail trade report – along with stable inflation numbers and a good jobs report for December – ended the week on a “semi-positive note,” said Kallum Pickering, senior economist at Berenberg.
Anecdotal reports from retailers suggest consumers held back in December but then emerged strong to take advantage of January sales, he said.
“However, we have to be careful. Monthly data is volatile. The increase in January merely offsets the large 3.3% month-on-month drop in December – bringing real sales back to November levels,” Pickering said in a note[imMonatsvergleichimDezemberaus–undbringtsomitdierealenUmsätzewiederaufdasNovember-Niveau“sagtePickeringineinerNotiz[month-on-monthdropinDecember–andhencereturnsrealsalestotheNovemberlevel”Pickeringsaidinanote
The new figures are consistent with “random stagnation” in the retail sector and with broader economic activity over the last 18 months, although Berenberg economists expect retail momentum to increase in the coming months due to higher real wages and consumer confidence, he added.
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2024-02-16 12:13:45
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