Retail sales slump as BRC sees new consumer caution

UK retail sales slumped in January and the industry warned of a new caution for consumers due to rising inflation.

January's BRC-KMPW retail sales monitor showed sales dropping 0.6% on a like-for-like basis, with total sales rising 0.1%.

The sector fared badly in comparison to the strong start last year, when LFL sales increased 2.6% and total sales 3.3%, while total sales were well below the 3-month average of 1.1% and the 12-month average of 0.9%.

Over the last three months, LFL food sales increased 0.6% and 2.0% on a total basis, above the 12-month average.

Non-food rose 0.2% and 0.3%, below its 12-month total average growth of 0.8% and the lowest since July 2012, with only furniture sales showing any vigour.

Many retailers reported an increase in the number of returns received in January.

“Looking across the last three months, we’ve seen the slowest growth of the festive period since 2009," said British Retail Consortium chief executive Helen Dickinson. "Closer inspection reveals that this was driven by slowing sales in non-food sectors.

“These figures suggest that 'caution' was top of new year shopping lists and the uptick in credit card lending at the end of the last year may be short lived.

"With the signs pointing to upward pressures on shop prices given rising import costs, all eyes will be on the impact of inflation on consumer spending. That said, retailers are a resilient and innovative bunch. They have become increasingly adept at responding to the challenging environment, and as a result the industry has been a key driver of recent UK productivity growth.”

Analysts at broker Shore Capital said the data suggested "folks did indeed have a bit of a Christmas fling, especially enjoying food and drink, but have adopted a more cautionary position with the start of the new calendar year".

That consumer credit uptake may have correspondingly eased may actually be read by some, including the Bank of England, as a welcome development, ameliorating its concerns about the heat of that market.

"Quite how the Bank balances economic growth, sterling's value and corresponding inflationary pressures remains to be seen; we believe that rates may yet rise in CY2017, albeit today's news may help the doves."