January sales drive pre-Brexit shopping spree - ONS

Retail sales rebounded strongly last month as shoppers hunted post-Christmas bargains ahead of Brexit, official figures show.

The Office for National Statistics (ONS) reported a 1% jump in sales volumes rose 1.2% in January after a 1% decline in the run-up to the festive season amid some Brexit caution.

It meant sales were 4.2% higher on January 2018 - the biggest leap since December 2016.

The ONS reported strong demand for discounted clothing and said food sales also contributed to the increase after a "slight dip" after Christmas.

The figures exceeded the expectations of economists by quite some margin as a January reading of 0.2% growth had been expected - along with an annual rate of sales growth of 3.4%.

The data helped sterling recover some ground against the dollar - rising back above $1.28 - as it suggested consumer spending has remained resilient in the face of wider challenges as wage growth continues to exceed the pace of inflation.

Separate ONS figures this week showed other sectors of the economy were stuttering ahead of the UK's departure from the EU.

It announced a preliminary reading of 0.2% growth for the UK economy during the final quarter of 2018 - a significant slowdown on the 0.6% achieved in the previous three months.

Drags included a collapse in construction output and continued declines in business investment as companies hold off on major investment decisions pending the outcome of Brexit.

Manufacturers are also staring down damage from the wider global slowdown linked to the effects of the US/China trade war.

Many retailers chose to discount ahead of Christmas in an attempt to drive sales following the failures of chains including Toys R Us, Maplin and House of Fraser - the latter later rescued by Sports Direct tycoon Mike Ashley - and rescue deals for other big names..

Mr Ashley recently appealed for government to do more to support the high street as it grapples with higher minimum wage, business rates and rent bills.

Analysts will be watching closely to see how profitability has held up when listed retailers begin to report financial results covering the Christmas period.

Some suggested the ONS figures showed shoppers were stockpiling, fearing the potential for any post-Brexit price increases after 29 March.

Rachel Lund, head of insights and analytics at the British Retail Consortium, said: "Few believe we are seeing the beginning of a turnaround in the fortunes of the industry.

"The discounts which drew shoppers into stores won't last forever and with uncertainty surrounding Brexit weighing on consumer confidence, once the period of seasonal promotions is over, households are likely to remain cautious with their spending."

Philipp Gutzwiller, head of retail at Lloyds Bank Commercial Banking, said: "There's 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".

He added: "Importantly for retailers, there's also an enormous difference between a discounted sale and one at full margin.

"But whatever the margin, these figures show that shops were able to persuade their customers to spend more in January than they did in December, which is undoubtedly a positive."