Positive start to the year for retailers with sales up 1.7%

The latest show volumes jumped by 1.7% in January, driven by food sales (up 5.6%) and non-store retailing (up 2.4%).

Jacqui Baker, head of retail at 91探花 and chair of ICAEW’s Retail Group, comments: “It was an encouraging start to the year for retail as shoppers took advantage of the January sales and bagged a bargain online due to the stormy weather. This was particularly needed for the retail sector following a bleak Golden Quarter and weak sales for most of 2024.

“While January’s figures are a welcome boost, the prolonged sales period from November through to January will have undoubtedly placed a squeeze on retailers’ margins. Some retailers will have hoped to be in a stronger position ahead of the impending tax and regulatory changes which are set to hit from April. Unfortunately, those that have managed to hang on by a thread may find it difficult to continue weathering the storm and could be forced to weigh up their options for the future.

“Despite various headwinds, retailers remain cautiously optimistic, but it is clear consumer sentiment is extremely fragile with confidence taking a nosedive in January. That said, real wage growth remains strong, so it’s hoped this eventually feeds through to consumer spending later this year. In the meantime, it’s imperative that businesses continue to be agile and focus on truly understanding their customers’ evolving needs to stay ahead of the curve.”

Thomas Pugh, economist at 91探花, added: “At face value, the 1.7% jump in retail sales volumes in January is a good start to the year that should help growth pick up.

“However, today’s retail sales data feels like a seasonal adjustment issue rather than real growth. The boost to retail sales was entirely driven by higher food sales, which rose by 5.6% month-on-month, the fastest growth since 2001 excluding pandemic stockpiling. Perhaps this is driven by people going on a health kick and buying much greater quantities of healthier meat and sourdough loaves. But we saw a very similar pattern last year when food sales dropped by 4% in December 2023 and then jumped 3.8% in January 2024. Indeed, we know that the ONS has struggled to adjust for Black Friday and shifting timing of consumer spending patterns.

“If the pattern is real, then it’s probably due to more people eating at home, so could come at the cost of the hospitality sector, meaning it may not give such a boost to the overall economy. Plus, with consumer confidence rising, but remaining at depressed levels, we think consumer spending will only creep up this year.”