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Growth in UK retail spending slowed in January, according to new industry data that suggests households continue to be squeezed by the cost of living crisis.
The value of retail sales rose by an annual rate of 1.2 per cent in January, the British Retail Consortium said on Tuesday. This was below the 1.7 per cent growth in December and the three-month average of 1.9 per cent, according to the trade body’s figures.
The rate of growth was also below the 4 per cent rate of consumer price inflation in December, indicating that the rise in sales masked a drop in volume, a trend seen for the past three years.
“Weak consumer demand led retail sales growth to slow,” said BRC chief executive Helen Dickinson. “While the January sales helped to boost spending in the first two weeks, this did not sustain throughout the month.”
The figures, which are compiled by advisory firm KPMG together with the BRC, provide an early indication of retail spending ahead of official data next week. Weak spending will raise concerns over the rebound in activity seen in other economic data, such as mortgage approvals and business sentiment.
The BRC figures chime with separate data published by Barclays on Tuesday, which showed a 1.7 per cent year-on-year increase in retail spending last month, below the average growth of 3.1 per cent across all consumer spending.
However, the payments company, whose report also includes consumer confidence surveys, did point to brighter spots in the economy for the year ahead.
While the 3.1 per cent growth in consumer spending last month was below the rate of inflation, it was up from 2.3 per cent in December, with a notable 11.4 per cent increase in spending on digital content and subscriptions, such as Netflix.
According to Barclays, consumer confidence is also on the rise: 70 per cent of households polled said they felt confident in their finances, the highest reading since November 2021.
Jack Meaning, chief UK economist at Barclays, said the increase in consumer confidence was “a positive message”, adding: “Spending looks to be on an upward trajectory [and] set to increase more than inflation in the coming months.”
Separate industry data on Monday showed UK business activity increased faster than previously estimated and stood at an eight-month high in January.
The final S&P Global UK services PMI business activity index rose to 54.3 last month, up from 53.4 in December and the initial reading of 53.8.
Tim Moore, of S&P Global Market Intelligence, said the PMI numbers “provide a strong boost to business activity expectations across the service economy”.
