Retail sales return to growth on the back of discounts

RETAIL sales rose in January and beat market expectations as shoppers took advantage of discounts following a disappointing Christmas.

Retail sales increased by one per cent last month following a 0.7 per cent decline in December, according to the Office for National Statistics (ONS). This beat the consensus forecast of just 0.2 per cent growth.

On an annual basis, retail sales grew by 4.2 per cent – the highest rate since December 2016.

Philipp Gutzwiller, head of retail at Lloyds Bank Commercial Banking, said: “Despite all the bad news we heard about the high street in January, shoppers returned to spending after a disappointing Christmas.”

He noted, however, that there was a “big difference between tempting shoppers with bargains and persuading them to keep buying once January’s discounts and new year’s resolution purchases are over”, while for retailers there is also a difference between a discounted sale and one at full margin.

In the three months to January, the quantity bought increased by 0.7 per cent. Sales at clothing and footwear retailers grew 5.5 per cent year on year while prices fell 0.9 per cent as shoppers took advantage of the January sales.

Food sales returned to the strong growth experienced in the summer at 3.2 per cent following a marked slowdown last year.

However, online sales slipped to 18.8 per cent from 19.8 per cent in December, due to a fall in sales from non-food retailers.

Howard Archer, chief economic adviser at EY Item Club, said that despite the spike in retail sales the Bank of England was still unlikely to hike interest rates before November and there was a “genuine chance” that it would sit tight on rates through 2019.

“The economy still seems to be struggling overall in the first quarter after a sharp slowdown in the fourth quarter of 2018 amid heightened Brexit uncertainties and slower global growth,” he added.