PwC comments on the Jan 2024 retail sales figures

Lisa Hooker, Leader of Industry for Consumer Markets comments on the latest ONS Retail Sales data for January 2024:

“After the precipitous decline in retail sales we saw in December as shoppers brought forward some of their Christmas spending into November’s Black Friday sales period, but also played it “safe” with smaller family gatherings, January’s recovered sharply. Sales on a value and volume basis were in line with November on a seasonally adjusted basis, suggesting that retail sales had returned to trend.

Compared with last year, there was little volume growth, with pounds in the till increasing by just under 4% as a result of inflation. The better-than-expected sales figures will no doubt have been helped by widespread discounting, for example in furniture, household goods and fashion, which was reflected in this week’s inflation announcement.

Grocery sales volumes also recovered in January after December’s month-on-month decline, as more people stayed at home, in contrast to the weak restaurant and pub performance we saw at the start of the year.

Clothing sales started with a bounce again due to discounting and back to school but rapidly deteriorated across the month with an overall sales decline.

The penetration of online sales fell back sharply, falling below 25% for the first time since before the pandemic, albeit the ONS notes there has been a change in its methodology with others suggesting the poor weather helped online. However, with so many high street bargains, maybe shoppers had little need to shop online, with declines reported across almost every category.

At first glance, January’s retail sales figures appear to contrast with the declining footfall and challenging trading conditions reported by some retailers. However, compared to the rest of the year, it is a much less important month of trading, so these numbers are more reflective of a return to the weak trend of growth we saw in the second half of 2023, rather than the start of a prolonged recovery.

While many of the macroeconomic indicators are positive - falling inflation, improving consumer sentiment, the prospect of lower interest rates - consumers remain cautious about spending, particularly in discretionary and big ticket categories, and we do not predict a sustained recovery until the second half of 2024.”