January discounts unexpectedly boost shop sales

UK shop sales volumes unexpectedly rose in January, despite higher living costs putting pressure on households, official figures show.

Sales rose by 0.5% in January, as shoppers sought to take advantage of post-Christmas discounts, the Office for National Statistics (ONS) said.

It comes after a fall in sales in December.

But one retail analyst warned it could be "a last hurrah" for consumers, as the cost of living remains high.

Lisa Hooker from PwC said that it was "hard to see" how the retail sector could keep up the strong momentum after the seasonal discounts end.

She added that things could get tougher for consumers, as inflation bites and incomes struggle to keep up.

Prices have been rising sharply since last year, mainly due to soaring energy costs, which has put pressure on millions of households.

While the rate of inflation is starting to ease, at 10.1% it remains close to a 40-year high.

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Online shops were boosted by January sales promotions, the ONS said.

But food store sales fell, as shoppers bought less due to the rising cost of living and high food prices.

Compared with January last year, overall sales volumes dropped by 5.1%.

And taken as a whole, retail sales volumes are still lower than pre-pandemic levels.

The ONS also said December's fall in retail sales was steeper than previously estimated, as consumers cut spending.

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

Fuel sales rose, as prices continued to fall at the pumps, while discounting helped boost sales for online retailers as well as jewellers, cosmetics stores and carpet and furnishing shops, Mr Morgan said.

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

"Food store sales dipped again with consumers reporting they were selecting lower-priced goods as the increased cost of living and higher food prices continue to bite."

Post-Christmas sales boost

Retail analysts said January's figures showed people had been keen to make the most of sales following the festive period.

"When your money isn't stretching as far as it did, it makes sense to wait for the sales you know are coming," said Danni Hewson from AJ Bell.

"Many families decided to cut back on their Christmas gift giving and there will also be plenty of people who chose to give cash with the expectation that their children or other family members could treat themselves to the things they really wanted at a price that looked much nicer."

However, Ms Hewson warned that retailers will view the figures with "mixed emotions", as despite the rise in sales, selling items at a discount does little to bolster margins.

Lisa Hooker from PwC added that the outlook for the sector was tough.

"For retailers, surviving the next six months will be critical to their success in the year ahead."