PwC comments on Jan 2023 retails sales

Commenting on the Office of National Statistics retail sales data for January 2023

Lisa Hooker, Industry Leader for Consumer Markets at PwC, said:

"The headline increase in retail sales volumes of 0.5% in January compared with December masks a more precipitous decline in the amount of goods sold, which fell 5.3% excluding petrol compared with January 2022. Because of inflation, in value terms, the pounds that retailers saw in tills increased by 3.7% compared with last year.

In addition, this time last year, the post-pandemic retail sales recovery had been held back by the Omicron variant. So even the increase in footfall this January was unable to be translated into increased sales volumes. The one bright spot for high streets is the continued fall in penetration of online shopping, with the proportion of internet sales dropping to 25% for the first time since before the pandemic. This suggests that the pandemic shift to e-commerce did not create a sustained step up in online shopping. 

In particular, there’s increasing evidence that, despite the easing of inflation last month, shoppers continue to cut back on grocery shopping to somewhat offset the increase in prices. The cost-of-living crisis means that shoppers are buying and wasting less food as well as trading down to cheaper items and shops.

The only other good news saw some speciality retailers benefit from January sales promotions. However, as seasonal discounts end, it’s hard to see how the sector can maintain the momentum of the better than expected Christmas trading results. December really looks to have been a last hurrah for consumers as inflation bites and incomes struggle to keep up. If anything, consumers seem to be prioritising spending on their summer holidays rather than shopping, judging by the surge in forward travel bookings compared with last year.

For retailers, surviving the next six months will be critical to their success in the year ahead. However, there will be light at the end of the tunnel once inflation eases as predicted in the second half of the year, and income growth turns positive in real terms.”