Retail sales boost as we enter a new decade
Here we are with the first ONS report looking at 2020 and finally, we can report a slightly more positive outlook.
Retail sales boost as we enter a new decade
According to data released today by the ONS, retail sales in January grew by 1.2% (value) and 0.9% (volume) when compared to December. The rise in volume marked the biggest rise since March last year and reflected a stronger turnaround than the 0.7 per cent month-on-month growth predicted on average by economists in a Reuters poll. This puts an end to the longest retail sales contraction on record.
The increase, albeit moderate, is credited to food stores (1.7% growth) and non-food stores (1.3%) and is largely being linked to a ‘Boris boost’ and the stability that a decisive result of the general election has brought.
According to Paul Dales, chief UK economist at Capital Economics, the rise “suggests that, by ruling out a no deal Brexit on January 31, December’s election result gave consumers the confidence to reopen their wallets”.
These shoots of growth are replicated when looking year on year, with January retail sales by value and volume growing 2.1% and 0.8% respectively.
However, it’s still a delicate time for the sector. When looking at a three-month picture, the amount spent fell by 0.5% and 0.8% respectively for amount spent and quantity bought.
“Retail sales fell overall in the latest three months with declines across all sectors,” ONS head of retail sales Rhian Murphy said. “This was despite a rebound in January with strong growth for most stores, although petrol stations saw a large decline which coincided with an increase in their fuel prices.”
The ONS reports that quantity bought in fuel stores decreased by 5.7% in January 2020 when compared with December 2019. Fuel prices also increased by 2.3 pence per litre between December 2019 and January 2020, while anecdotal feedback from retailers also suggested the wet weather in parts of the country may have reduced fuel sales.
The monthly growth rate shows that all sectors except household goods stores and fuel stores increased in the quantity bought, resulting in an overall increase of 0.9%.
Once again, the ONS figures paint a different store to separate monthly figures from the BRC and CBI, both which showed January retail sales had flatlined. However, the bounce seen in ONS data is being welcomed across the board.
Commenting on the ONS figures, Deloitte head of retail Ian Geddes said consumers started the new decade on “a confidence high”, counteracting the seasonal dip that January usually brings. “Whilst this is positive news for retailers, following a difficult Christmas for some that was punctuated by deep discounting, some lingering caution remains,” he said. “Consumers may still be in ‘careful shopping mode’, but for how long is yet to be seen.”
He adds, “In recent years we have seen the emergence of a more conscious consumer, equipped with greater awareness of the ethical and environmental impact of what they buy. For some, this has simply meant buying less and decluttering or, in fashion, buying into new services such as wardrobe rentals. For other consumers, the event of a new year has kick-started new habits, be it switching to a plant-based diet for ‘veganuary’, or restricting alcohol consumption for ‘dry January’. Retailers are catering to these seasonal trends more than ever, bringing new product ranges to shop floors that match changing consumer tastes.”
Online sales, which remained relatively steady at around 19-20% during 2019, have continued this trend. Spending online increased in January at 0.9% when compared month on month, with strong growth in food stores (5.7%) and non-store retailing (5.1%).
Year on year comparison...
Year on year, online sales increased by 4.9% in January 2020, when compared with January 2019. Other stores and non-store retailing both reported strong growth at 11.5% and 9.9% respectively, while department stores reported the largest fall at negative 14.4%. As a proportion of all retailing, online sales was 19.0% in January 2020, down from 19.3% in December 2019.
BRC head of retail insights Kyle Monk said: “UK sales volumes up rose a modest 0.9 per cent month-on-month in January, the first rise since October, suggesting that the rise in consumer confidence since the December election may have lifted willingness to spend.
He added: “It is essential progress is made quickly in the upcoming EU trade negotiations otherwise the UK risks squandering any boost to consumer confidence. Without a comprehensive deal, food and other goods will face extensive tariffs, checks and delays at the border – raising costs and creating disruption for consumers.”
Political and Economic Turmoil
Institute of Customer Service chief executive Jo Causon said: “Despite a stuttering economy, consumers have enjoyed a positive start to the year, in part due to heavy discounting in the January sales. The challenge for retailers however remains significant. Customer satisfaction is at its lowest level since 2015, as customers are becoming increasingly discerning in their purchasing choices and punishing brands that fall short on best practice.
Given the political and economic turmoil that the UK has experienced in recent times thanks to nation-wide issues like Brexit and low interest rates, we can reflect that it’s no wonder consumers have been holding on to their hard-earned cash. However, the sector has needed a boost for a long time now and it’s great to see that with some recent political stability, consumer confidence is now starting to return and hopefully giving the high-street and beyond the injection of cash it very much needs to get back on its feet.
The Christmas Grinch takes over any glimmer of retail cheer
In an ongoing escalation of the high-street crisis, ONS reports that retail sales volumes fell by 0.6% in December which represents a five-month ongoing decline. Looking at it from a three-month perspective, sales (quantity bought) are down 1% overall and amount spent down 0.9% for the October – December period when compared year on year; this is despite the spending sprees usually associated with Black Friday and the holiday period
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