UK retail sales recover more than expected from Omicron knock

Retail sales volumes rose by 1.9% in January after a 4% decline in December

British retail sales grew faster than expected in January, recovering about half the losses suffered when a wave of coronavirus cases caused many shoppers to stay at home during December.

Retail sales volumes rose by 1.9 per cent in January after a 4 per cent decline in December, the largest rise since lockdown rules for non-essential stores in England were relaxed last April.

The monthly increase was larger than the average 1 per cent gain forecast in a Reuters poll, although December’s drop in sales was slightly bigger than first estimated.

"The solid rise in retail sales volumes in January adds to the signs that the Omicron-induced hit to activity was smaller and shorter-lived than previously thought. Even so, the cost of living crisis means the outlook for retailers is anything but bright," said Adam Hoyes, economist at Capital Economics.


Retailers face rapidly surging consumer price inflation, which hit its highest in nearly 30 years in January at 5.5 per cent, and is forecast by the Bank of England to peak above 7 per cent in April.

A separate measure of inflation used to calculate January’s retail sales data rose to 6.7 per cent, the highest on record.

Fast-rising prices for energy and food leave consumers with less spare cash to spend on non-essentials, and 2022 looks set to bring the biggest squeeze on households disposable income in 30 years.

January sales volumes were 9.1 per cent higher than a year earlier, when non-essential shops were shut due to lockdown restrictions, and 3.6 per ent above pre-pandemic levels.

Britain’s retail sector as a whole was relatively resilient through the Covid-19 pandemic, with sales as a whole already back above January 2020 levels in July 2020, thanks to a big shift to online shopping.

However some retailers, especially clothes stores with little online presence, found it much harder to recover from repeated lockdowns, the last of which ended in England in April 2021.

Some pandemic trends have been slowly reversing. The percentage of sales made online fell to 25.3 per cent in January, its lowest since March 2020 although still well above the 19.8 per cent seen in February 2020 before the pandemic.

Food sales also fell below pre-pandemic levels for the first time.

"More people returned to eating out and there was also anecdotal evidence suggesting higher demand for takeaways and meal-subscription kits," ONS statistician Darren Morgan said.

- Reuters