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January sees retail sales bounce back

Sales rose 1.9pc during January, just a month after heavy snow caused the biggest December month-on-month fall in sales volumes on record.

Petrol and diesel sales showed the biggest monthly gain in January, although the rise was broadly felt with a strong increase in sales at department stores and clothing and household goods retailers.

The Office for National Statistics said it was hard to disentangle the effects of two successive rises in VAT in January 2010 and January 2011, combined with harsh winter weather in January 2010 and December 2010. In contrast, December's month-on-month figures were revised down to minus 1.4pc from 0.8pc, while the year-on-year figure was amended to minus 0.7pc from plus 1pc, according to figures by the Office of National Statistics.

Retail bounces back in January

Peter Dixon, economist at Commerzbank, said: "If you look at where we are relative to November, we're only 0.5pc up, so it does indicate that the trends for sales remain fairly sluggish. Although we can probably expect some upside to Q1 consumption and therefore GDP as a consequence, I don't think we should get too excited until we have a couple of months of additional data, which I suspect will tell us that spending growth remains fairly weak.".

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said December's downward revision provides "some downside potential for fourth quarter GDP".

"The figures at this time of the year also come with a big health warning, given the extreme seasonality of retail spending and the great lengths that the ONS has to go to in order to adjust for these effects," he added.

Vicky Redwood at Capital Economics said that, "We wouldn't take January's rise in sales as evidence that the consumer recovery is firmly back on track. Indeed, with real household incomes set to fall significantly this year, we find it hard to see consumer spending doing at all well."

While Marc Ostwald at Monument Securities thought, "As the Bank of England Governor Mervyn King has himself observed on many occasions it's almost impossible to make a judgement on acutal winter retail sales trends until you get to Easter. I think the market's rightly ignored this, largely. It's absolutely definitely not a trend. We won't get a proper idea of trend until we get to March."

Perhaps with a little more optimism, Philip Shaw at Investec said, "Trying to discern underlying trends from retail sales data at this time of year is difficult normally given seasonal problems. But given the added problems of the snow in December and the VAT hike in January, things are more complicated, but certainly on face of it, the figures are much more robust than expected."

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