Yahoo News UK retail sales rebound in January after Omicron hit
Retail sales bounced back in January as shoppers hit the high street again after the Omicron variant hit despite the cost of living squeeze.
The figures from the Office for National Statistics (ONS) show sales volumes were up by 1.9% in January — 3.6% higher than pre-pandemic levels.
The growth, which was driven by increased spending on household goods and at garden centres, came despite inflation hitting a 30-year high of 5.5%.
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However, it came after a 4% fall in December when shoppers stayed at home in the run-up to Christmas as Omicron spread through the country.
ONS director of economic statistics Darren Morgan said: “After a sluggish December, where the Omicron wave had a significant impact, retail sales rebounded in January with their biggest monthly rise since the shops reopened last spring.”
The overall level is still higher than before the pandemic, but below the peak in spring last year.
Non-food store sales rose 3.4% in January as home improvement sales volumes picked up, with increased sales in household goods and garden centres.
Petrol and diesel sales were up by 4.1% in January as workers returned to the office following a fall of 5% in December when Omicron restrictions meant people were working from home
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said shoppers appeared to be shrugging off the mounting cost of living crisis but that things might change.
“At some point lockdown savings will be spent, and the rapid rise in prices on supermarket shelves, energy bills and petrol forecourts, combined with looming tax increases, is highly likely to put a dampener on consumer spending.
"The warning lights are already blinking in other data out this week from the ONS. More than three quarters of adults say their cost of living had increased over the last month; up from 69% in the last period showing that price rises are beginning to cut through to consumer sentiment.’’
Retailers face rapidly surging consumer price inflation, which hit its highest in nearly 30 years in January at 5.5%, and is forecast by the Bank of England to peak above 7% in April.
A separate measure of inflation used to calculate January’s retail sales data rose to 6.7%, the highest on record.
Read more: UK consumer prices hit new 30-year high as inflation rises to 5.5%
The figures also revealed that food sales dropped by 2.3% for the month, representing the biggest fall since May last year, as people returned to restaurants and pubs.
Danni Hewson, AJ Bell financial analyst, said: “The surge in non-food sales did not stretch to clothing retailers, despite those post-Christmas discounts people clearly felt they had enough “zoom ready” tops and with restrictions still in place until the end of the month, concluded eating in could be done whilst dressed down.”
On an annual basis, people bought 9.1% more items than a year ago, when non-essential shops were closed in the 2021 lockdown.
However, with price growth set to peak at 7.25% and a cost of living crisis looming, it is likely consumers will tighten the purse strings in the coming months.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Rising inflation means households may be preparing for future falls in disposable income, including from April’s national insurance and energy price cap rises. Retailers face similar challenges, with increases in transport and energy costs, global commodity prices and domestic wages.
“While retailers are going to great lengths to mitigate or absorb these cost increases, it is inevitable that prices will rise further in the future.”
Paul Martin, UK head of retail at KPMG, says businesses are facing tough decisions about how to handle rising costs.
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He said: “Retailers will be acutely aware however that the cost of living squeeze could see consumers scrutinising their spending more over the coming weeks and months, impacting trade. This picture will be compounded if those who managed to save during the pandemic decide the time isn’t right to spend what they’ve accrued.
“As is the case for consumers, retailers also face inflationary pressures. Businesses have challenging decisions to make about how to absorb those, or how to pass them on without losing custom.”
The percentage of sales made online fell to 25.3% in January, its lowest since March 2020 although still above the 19.8% seen in February 2020 before the pandemic.
