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Retail sales rebound in January but cost of living crisis looms

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
18/02/2022

Retail sales volumes recorded a ‘solid rebound’ in January following the negative effect of the Omicron variant over the festive period.

January retail sales volumes rose by 1.9%, following a fall of 4% in December. This is the largest monthly increase since April 2021, and takes sales volumes to 3.6% above their pre-Covid February 2020 levels.

According to Capital Economics, this suggests that shoppers were already becoming less cautious in January as the end of ‘Plan B’ virus restrictions were announced and Covid cases fell back.

The figures from the Office for National Statistics (ONS) revealed that home improvement spending pushed up the figure as shoppers flocked to household goods, electrical and furniture stores, garden centres and department stores.

Fuel sales also contributed to the figure as staff returned to workplaces following December’s home working push to combat the Omicron variant.

However, food store sales volumes fell below their pre-coronavirus levels for the first time and were 0.8% below where they were in February 2020. The ONS said food store sales have been falling since June 2021 as “consumers diverted spending to services as the economy reopened”. In particular, dining out and home deliveries proved popular.

Meanwhile, the ONS noted that the proportion of online sales fell to 25.3% in January 2022, its lowest proportion since March 2020. This continues its downward trend since the peak in February 2021 where more than a third of sales (36.5%) were made online. However, the figure is still higher now than before the coronavirus pandemic – 19.8% in February 2020.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “Retailers will be cheering on signs that shoppers are voting with their feet to support the high street, but plenty of big spenders may slink away in the months to come. The sales uplift in January shows the Omicron recovery is underway but retailers haven’t yet recouped all of December’s losses.

“At some point lockdown savings will be spent, and the rapid rise in prices on supermarket shelves, energy bills and petrol forecourts, combined with looming tax increases, is highly likely to put a dampener on consumer spending. The warning lights are already blinking in other data out this week from the ONS. More than 3/4 of adults say their cost of living had increased over the last month; up from 69% in the last period showing that price rises are beginning to cut through to consumer sentiment.”