ONS: Retail Sales Rebounded In January

The ONS has published retail sales data for the period 31 December 2023 to 27 January 2024.

• Retail sales volumes (quantity bought) are estimated to have rebounded by 3.4% in January 2024, following a record fall of 3.3% in December 2023 (revised from a fall of 3.2%). This was the largest monthly rise since April 2021 and returned volumes to November 2023 levels.
  
  
• Sales volumes in all subsectors except clothing stores increased over the month, with food stores such as supermarkets contributing most to the increase.
  
  
• More broadly, sales volumes fell by 0.2% in the three months to January when compared with the previous three months, however this was the smallest fall since August 2023.
  
  
• Consumers spent more for less in January 2024, as the 3.9% monthly rise in sales values (the amount spent) exceeded the 3.4% rise in sales volumes.
  
  
• The rise in January 2024 returned sales volumes to November 2023 levels following December's record fall, which was the largest monthly fall since January 2021, when coronavirus (COVID-19) restrictions affected sales.
  
  
• Looking over a longer period, sales volumes rose 0.7% between January 2024 and January 2023 but were still 1.3% below their pre-coronavirus pandemic level in February 2020. 
  
  
• Non-food stores sales volumes (the total of department, clothing, household and other non-food stores) returned to broadly expected levels, with a rise of 3.0% over the month following a 3.9% fall in December.
  
  
• Some of the fall in December was because of consumers purchasing Christmas gifts earlier, during the November Black Friday discounts. But 46% of surveyed adults still reported plans to spend less on Christmas shopping because of the rising cost of living.

• Sales volumes in department stores and other non-food stores (such as sports equipment stores) rose over the month by 5.4% and 6.2%, respectively, with some retailers reporting the positive impact of January sales. Household goods stores rose by 1.8% in January 2024, which was mainly because of sales in hardware stores, while clothing stores fell by 1.4%.
  
  
• The amount spent online, known as online spending values, fell by 4.1% over the month to January 2024 but grew by 1.0% over the year (likely because of inflation).
  
  
• The proportion of sales made online fell from 26.8% in December 2023 to 24.8% in January 2024. 

PwC Commentary

Lisa Hooker, Leader of Industry for Consumer Markets comments on the latest ONS Retail Sales data for January 2024:

“After the precipitous decline in retail sales we saw in December as shoppers brought forward some of their Christmas spending into November’s Black Friday sales period, but also played it “safe” with smaller family gatherings, January’s recovered sharply. Sales on a value and volume basis were in line with November on a seasonally adjusted basis, suggesting that retail sales had returned to trend.

Compared with last year, there was little volume growth, with pounds in the till increasing by just under 4% as a result of inflation. The better-than-expected sales figures will no doubt have been helped by widespread discounting, for example in furniture, household goods and fashion, which was reflected in this week’s inflation announcement.

Grocery sales volumes also recovered in January after December’s month-on-month decline, as more people stayed at home, in contrast to the weak restaurant and pub performance we saw at the start of the year.

Clothing sales started with a bounce again due to discounting and back to school but rapidly deteriorated across the month with an overall sales decline.

The penetration of online sales fell back sharply, falling below 25% for the first time since before the pandemic, albeit the ONS notes there has been a change in its methodology with others suggesting the poor weather helped online. However, with so many high street bargains, maybe shoppers had little need to shop online, with declines reported across almost every category.

At first glance, January’s retail sales figures appear to contrast with the declining footfall and challenging trading conditions reported by some retailers. However, compared to the rest of the year, it is a much less important month of trading, so these numbers are more reflective of a return to the weak trend of growth we saw in the second half of 2023, rather than the start of a prolonged recovery.

While many of the macroeconomic indicators are positive - falling inflation, improving consumer sentiment, the prospect of lower interest rates - consumers remain cautious about spending, particularly in discretionary and big ticket categories, and we do not predict a sustained recovery until the second half of 2024.”

Source : ONS, PwC

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