10 months ago • 2 mins
Data out on Friday showed that UK retail sales beat the January Blues, as last month’s discounts helped shopping stage a comeback.
What does this mean?
After lackluster retail sales in late 2022, economists were bracing themselves for a 0.3% drop when January rolled around. But shoppers had other ideas: they proved quick on the draw with their wallets last month, snatching up discounted makeup, furniture, and jewelry in the bumper post-Christmas sales. Online stores also reaped the rewards of that spending – and fuel sales jumped too, as the lowest prices in almost a year had folk lining up at the pumps. Sure, there were a few categories dampening the mood – food and clothing each took a dip – but the overall volume of goods sold in January still came in 0.5% higher than December.
Why should I care?
Zooming in: Not a U-turn.
This uptick is welcome news, but let’s not get carried away: retail sales are still 1.4% below their pre-pandemic levels, and inflation means shoppers are getting a lot less bang for their buck right now. And that’s not set to change anytime soon: after all, inflation in the UK may have fallen to a five-month low in January, but wage growth is still trailing behind it. And with that trend likely to continue, households are in a serious pinch – especially with government support being axed and homeowners having to remortgage at higher rates. The end result: households have wound up with less cash to splash – which could be why economists see retail sales resuming a downward trend for the first half of 2023.
The bigger picture: Hikes ahead.
That outlook bodes badly given how much Britain's economy depends on consumer spending. And it doesn’t help that the Bank of England's economy-hitting interest rate hikes are set to continue. In fact, markets shifted after Friday’s surprise data, pricing in a higher chance of rates rising another 0.5 percentage points before the summer's out.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
/3 • Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.