Retail sales surge back in January, BRC data shows

UK retail sales in January were much stronger than expected, expanding by 2.6% on a like-for-like basis compared to the same month last year, versus a consensus forecast of 0.3%.

Data from the BRC-KPMG Retail Sales Monitor showed total retail sales were up 3.3%, which was the best monthly growth since September, firmly ahead of the three-month average of 1.6% and the 12-month average of 1.9%.

Adjusted for the BRC-Nielsen Shop Price Index deflation, total growth was 5.1%.

Furniture was the strongest category in the traditionally important sales month, with clothing surging after a weak Christmas, and all product categories apart from food contributing to the growth.

Following on from a somewhat disappointing Christmas period for retailers, the new year kicked off to a strong start, said the BRC's chief executive Helen Dickinson. "This was the best performance for retailers since September and ahead of the three and twelve month averages."

She noted that after seeing a slight recovery in December, food sales were once again slightly down in January, while the mildly positive longer term trends were unchanged.

“Retailers will welcome the positive start to what will be a momentous year for the industry," she said. "Next month the Treasury will report back on its long awaited review of the business rates system. This is the moment for the government to rebalance this tax away from property intensive industries in order to ensure that the introduction of the living wage does not have unintended consequences on our local communities and jobs.”

Lower oil prices were leading to continued confidence from consumers, said economist Sam Tombs from Pantheon Macroeconomics, but looking ahead, however, he continue to expect the recovery in consumer spending to lose pace.

"Real income gains will slow in response to reviving inflation, slower job gains and an intensifying fiscal squeeze."

Online sales of Non-Food products grew 14.9% in January versus a year earlier, when they had grown 11.7%. The Non-Food online penetration rate was 21.5%, up 1.4 percentage points from January 2015.