Retail sales unexpectedly rise in January

UK retail sales unexpectedly rose in January but the outlook remains weak overall, according to figures released on Friday by the Office for National Statistics.

Retail sales were up 0.5% on the month following a 1.2% decline in December. Economists had been expecting a 0.3% fall.

Non-food stores sales rose 0.6% over the month following a 2.5% decline in December 2022. Feedback from retailers suggested that growth was supported by sales promotions, the ONS said. Still, sales remained 2.9% below their pre-pandemic levels.

Non-store - mainly online - retail sales were also said to have been boosted by promotions, up 2%.

On the year, retail sales were down 5.1% in January following a 6.1% decline the month before and versus expectations for a 5.5% fall.

The ONS said sales volumes were 1.4% below their pre-pandemic February 2020 level.

ONS director of economic statistics Darren Morgan said: "After December’s steep fall, retail sales picked up slightly in January, although the general trend remains one of decline.

"In the latest month, as prices continue to fall at the pumps, fuel sales have risen.

"Meanwhile, discounting helped boost sales for online retailers as well as jewellers, cosmetic stores and carpet and furnishing shops.

"However, after four months of consecutive growth, clothing store sales fell back sharply."

Paul Dales, chief UK economist at Capital Economics, said: "On the face of it, these data add to the view that activity is holding up fairly well. But there are two reasons not to get too carried away. First, retail sales were very weak last year but overall consumer spending held up due to stronger non-retail spending (particularly in restaurants). When households’ finances are under pressure, it possible that any improvement in retail sales will be just be met by a softening in non-retail spending.

"Second, although the biggest falls in real incomes are now behind us, the full drag on activity from higher interest rates has yet to be felt. As such, it is too soon to conclude that the retail sector is coming out of its funk and that the economy won’t yet fall into a recession."