UK retail sales bounces back in Jan as Omicron impact eased

Bloomberg

UK retail sales bounced back in January as the impact of the Omicron variant on consumers ebbed.
The volume of goods sold in stores and online added 1.9%, reclaiming some of the 4% plunge in December, the Office for National Statistics (ONS) said. It was the biggest monthly increase since April when non-essential stores reopened. Economists had expected growth of 1.2%.
The figures add to a raft of data that are likely to convince the Bank of England (BOE) that the UK economy is recovering strongly enough to cope with a third-straight interest-rate hike in March. They also provide some succor for the nation’s beleaguered retailers, who saw a dismal December after households brought forward their festive shopping in fear of further Covid restrictions.
The growth was driven by a pickup in spending on household goods and at garden centers. Sales at food stores fell below pre-pandemic levels for the first time in January, while the share of retail sales online fell to its lowest level since March 2020.
Still, with taxes and energy bills set to rise in April, and the BOE forecasting inflation to hit a peak of 7.25%, economists expect spending to slow again in the coming months, especially on big-ticket items.
“Retailers will be acutely aware however that the cost-of-living squeeze could see consumers scrutinising their spending more over the coming weeks and months, impacting trade,” said Paul Martin, UK Head of Retail at KPMG. “This picture will be compounded if those who managed to save during the pandemic decide the time isn’t right to spend what they’ve accrued.”
The ONS said retail sales fell 0.5% in the fourth quarter rather than the previously estimated 0.2%.