Shoppers return to UK high streets after dire 2019 trading

December’s election kick-started retail sales, say analysts

Phil Thornton
Thursday 20 February 2020 16:22 GMT
Christmas shoppers in Cambridge tempted out by big discounts being offered by retailers
Christmas shoppers in Cambridge tempted out by big discounts being offered by retailers (PA)

Shoppers returned to the high street and out-of-town shopping centres last month, prompting the first rise in retail sales in six months and raising hopes of an end to a dire season for the sector.

Sales volumes rose by 0.9 per cent between December and January, beating the consensus forecast of a 0.7 per cent monthly gain; however, it was only the second monthly rise in sales since July.

The figures looked even more positive once a 5.7 per cent monthly drop in fuel sales was excluded, leaving underlying retail sales growth at 1.6 per cent, the largest gain since May 2018. Petrol and diesel prices jumped by 1.9 per cent in January or 2.3p a litre on average fuel prices.

Paul Dales, chief UK economist at Capital Economics, said that December’s election has kick-started high-street activity. “January’s retail sales figures showed that December’s election result gave consumers the confidence to reopen their wallets,” he said.

The upturn in activity was spread across the sectors, with food stores seeing a 1.7 per cent increase and general retailers 1.3 per cent. With that a 3.9 per cent jump in clothing sales was the fastest since May 2018 while online sales rose by a robust 2.5 per cent. The household goods sector was the only sector where sales fell, by 1.1 per cent.

While the January uptick will be welcomed by retailers, it does not full offset the poor trading session in the previous two months, which saw volumes decline by 0.8 per cent and 0.5 per cent in November and December respectively. On an annual basis sales volumes have risen by just 0.8 per cent.

The recent flooding and effects of the coronavirus may hinder sales in February and March, analysts have warned.

Aled Patchett, head of retail and consumer goods at Lloyds Bank Commercial Banking, said many retailers continued to plan ahead with a cautious outlook, having endured a difficult Christmas.

“The ongoing coronavirus situation has also created new challenges for those with supply chains in the far east – particularly in the world of fashion – adding to the need to plot a conservative course in the next few months.”

The upturn will also be seen as supporting the Bank of England’s decision to keep interest rates on hold last month.

Elizabeth Martins, a senior economist at HSBC bank, said the “strong” number in retail sales excluding fuel was consistent with a broader improvement in the UK economy since the turn of the year.

But she added: “One swallow does not make a summer, and a rise after five months of falls should be sizeable. “The big question for the broader UK — and indeed global — economy is whether January’s bounce can survive into February and beyond.”

She warned the initial euphoria after the election result might already have faded, particularly in light of concerns around the coronavirus, adding that the snapshot survey of the UK businesses in the Purchasing Managers Index out on Friday would give economists a better idea.

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