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Two weeks in the UK - 14th February - Updated

With Valentine’s Day having provided the first of this year’s potential trading peaks retailers will have been hoping that shoppers share their love with them too.

Although it is still a little early to judge whether shoppers did splash out to treat their loved ones, it’s certainly true retailers have been feeling a little neglected and in need of a good dose of TLC.

January sales figures, issued by the British Retail Consortium with its BRC-KPMG Retail Sales Monitor last week, suggested UK retail sales were down 0.3 per cent on a like-for-like basis compared to the same month last year when sales had risen 2.3 per cent.

Overall sales were up 2.1 per cent against an increase of twice that for the previous year. The figures meant it was the second worst performance for a January trading period – other than in January 2010 – since the survey began in 1995 – a stark warning of just how tight things currently are for consumers.

Food sales slowed sharply and consumers also cut back on clothing, footwear and homewares – despite the January sales – where performance in January was worse than in December. The BRC said the results showed customers were still worried about their spending and were budgeting hard.

However figures released by the Office of National Statistics this week showed that by its estimates sales volumes in January were actually up by 2 per cent – although it admitted this was driven primarily by non-store retailing. On its measurements the value of retail sales for January 2012 was up 4.4 per cent compared to January 2011.

January figures from Experian FootFall showed footfall down by nearly a third compared to December and down by 2.5 per cent compared with January last year.

There have also been continuing rumblings from the fallout of Christmas with a sale of Peacocks likely this week and even previously high flying brand Supergroup – owners of the Superdry and Cult stores – admitting sales had slowed thanks to heavy January discounting. The severe weather of the last week has also impacted this month’s trading and footfall figures and provided further worries for retailers with Experian FootFall claiming a 7.3% drop compared to the same week last year  and a drop of 10% for the weekend which it attributed to the recent snow.

But there have also been signs that the strain on consumer spending could ease from an inflationary point of view – although many still argue that costs are rising higher than wages. Figures from the Office of National Statistics release earlier this week have shown a sharp fall in the Consumer Price Index- down from 4.2 per cent in December to 3.6 per cent last month.

The figure – the lowest for over a year – is supported by the most recent figures from the British Retail Consortium’s own measure of inflation last week which showed that overall shop price inflation fell to 1.4 per cent in January – down from 1.7 per cent the previous month.

Thanks to numerous promotional activities from the supermarket giants food inflation also fell – down from 4.2 per cent in December to 3.7 per cent in January.

However the most significant figure was a fall for non food inflation to zero from 0.3 per cent in December.

Stephen Robertson, Director General of the British Retail Consortium, praised retailers for holding non-food prices despite facing higher external costs.

“Further falls in the official rate of inflation which are expected during the coming months should be a further boost to customers budgets and crucially should help to improve consumer confidence,” said Robertson.

And retailers are hoping that like Valentine’s Day further feel good factors will kick in later this year and persuade customers to spend – including the celebration of the Queen’s Jubilee during the second quarter and the Olympics during the third quarter.

For now though, consumers are exercising their purses hard – hoping to be in better financial shape later this year.

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