Thursday 20 February 2020 10:24 am

UK retail sales jump 1.6 per cent in January after Tory election victory

UK retail sales excluding fuel jumped the most in almost two years in January, official figures showed today.

Retail sales rose excluding fuel 1.6 per cent compared to the month before as the new year got underway, the Office for National Statistics (ONS) said.

And retail volumes rose 0.9 per cent to recover from falls in November and December characterised by Brexit uncertainty.

Read more: UK consumers abandon high street for retail parks and shopping centres

After yesterday’s leap in UK house price growth, the 1.6 per cent increase points to growing evidence of a so-called Boris bounce after the Prime Minister’s resounding General Election victory in December.

Fashion retailers enjoyed the biggest month-on-month rise between December and January, seeing shoppers buy 3.9 per cent more clothes and footwear.

Supermarkets also recorded a 1.7 per cent bump and Britain’s struggling department stores saw sales climb 1.6 per cent.

Only household goods performed poorly, slipping 1.1 per cent since Christmas.

The 1.6 per cent growth figure smashed economist expectations of a 0.8 per cent rise, and forecast growth of 0.6 per cent.

But retail sales fell over the three months to January compared to the previous three months due to a weak November and December.

Excluding fuel, retail sales fell 0.8 per cent on a quarterly basis, with all sectors of the retail industry experiencing declines.

Read more: UK inflation rate jumps to 1.8 per cent in January

“Admittedly, sales are unlikely to climb at this pace for long as some of it is probably just a catch up from the previous weakness,” said Capital Economics’ chief UK economist Paul Dales.

“What’s more, the extremely wet weather and floods will have pushed shopping down the list of priorities in February. And the effects of the coronavirus may be hurting sales in areas frequented by Chinese tourists (Bicester Village) and may lead to shortages of some products (clothing, electrical appliances) in March.

Increased consumer confidence inspires spending

“This raises hopes that the improvement in consumer confidence seen since December’s election is translating into increased spending,” Howard Archer, chief economic adviser to the EY Item Club, said.

“January’s rise in retail sales follows a particularly poor performance over the latter months of 2019 when consumers seemed to be particularly cautious amid heightened domestic political and Brexit uncertainties.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the Tory election win has “released the handbrake of political uncertainty on consumers’ spending”.

Read more: London house prices: Did your borough benefit from the Boris bounce?

“Looking ahead, the outlook for growth in households’ disposable incomes remains bright,” he added. “Inflation looks set to hover about 1.5 per cent over the next six months, thanks to falls in energy and import prices.

“Hiring indicators have picked up since the election, while more workers than in previous years will benefit from April’s 6.2% increase in the National Living Wage.”

But Deloitte head of retail Ian Geddes warned: “Whilst this is positive news for retailers, following a difficult Christmas for some that was punctuated by deep discounting, some lingering caution remains. Consumers may still be in careful shopping mode, but for how long is yet to be seen.”