RETAIL sales volumes in Great Britain rebounded in January after a sharp fall in the key trading month of December, official figures show, but economists highlighted challenging times for price-conscious consumers amid Brexit uncertainty.
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Figures published yesterday by the Office for National Statistics showed retail sales volumes rose by one per cent in January on a seasonally adjusted basis, a much-sharper increase than the 0.2% advance forecast by economists. Sales volumes had fallen by 0.7% in December.
Economists highlighted consumers’ appetite for discounts, in a tough economic climate.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “It was evident that, similarly to November when Black Friday promotions boosted sales, consumers were keen to take advantage of discounted prices in the clearance sales.”
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However, he added: ““Despite January’s spike, retailers are likely to be concerned that cautious consumers will limit their spending in the near term at least due to the heightened uncertainties over Brexit.
“The GfK consumer confidence index remained at the lowest level since mid-2013 in January. Consistent with this, lenders expect demand for unsecured consumer credit to fall in the first quarter of 2019 at the fastest rate since records began in 2007, according to the latest Bank of England credit conditions survey.”
Mr Archer noted that, with nominal pay increases having strengthened and inflation having fallen back, real earnings growth was on an upward trend and was now at its greatest since late-2016.
However, he added: “A number of factors may limit consumer spending. Despite the recent improvement, consumer purchasing power is still relatively limited compared to past norms, while confidence is fragile. Furthermore, with the savings ratio being very low, consumers may at the very least be keen to avoid further dissaving - especially given current major uncertainties. Meanwhile, lenders have cut back on the availability of unsecured consumer credit.”
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Emma-Lou Montgomery, associate director for personal investing at Fidelity International, said: “It seems that shoppers have finally opened up their purse after…retail sales figures bucked the trend of disappointing UK data we have seen this week.”
ONS data published on Monday showed UK economic growth slowed to just 0.2% quarter-on-quarter in the final three months of last year.
However, Ms Montgomery said of the sales figures: “UK retailers shouldn’t get too excited by [the] news as we are not out of the woods yet, especially as ongoing Brexit concerns and tepid wage growth could still hold back consumer spending.”
The ONS noted online sales as a total of all retailing fell to 18.8% in January, from 19.8% in December.
Ms Montgomery said: “This comes as something of a surprise following months of talk about the dominance of the online retailer. The only sector where online sales picked up was food, which saw their proportion increase to 5.8% from the 5.7% reported in December. However, will this trend continue? With Fidelity’s real-estate team predicting a steep fall in retail rents and property values in the short term as retailers will struggle to afford the extortionate prices of rent on the high street, we may see online sales pick up again.”
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