January data from the Office for National Statistics (ONS) shows that retail sales in the UK managed just a 0.1% rise on the December figure. This lack-lustre performance can be attributed to two factors which, naturally, act in concert: higher prices for goods on offer and declining spending power as wage inflation continues to lag the official CPI inflation figure.
On the one hand, sales of sports equipment saw a boost, a factor attributed to a raft of New Year’s resolutions to get fitter and lose weight, but on the other food sales fell. On reflection, perhaps these two facts are related and consumers are being diligent in respecting their resolutions (or not). Mitigating against the healthy option is the fact that there has been a “continued slowdown” in retail sales, according to the ONS and therefore January’s data is just a further step on that pathway.
If the data is examined on a year-on-year basis, then sales volumes were 1.6% stronger in January 2018 than a year earlier which is the best performance seen since the comparable figure for August 2017. Domestic demand is the driving force in almost every economy and by this measure, the UK’s performance is nothing to write home about. The global economy has strengthened since the Brexit vote, but the UK’s economic performance, whilst positive, lacks the strength seen in other leading economies which almost certainly reflects the economic drag factor of the Brexit decision.
Rhian Murphy, a senior statistician at ONS summarised the data this way: “Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector. This can partly be attributed to a background of generally rising prices".
Traditional “High Street” retailers have been feeling the pinch as consumer disposable income has dwindled and also faced stiff competition from online retailers. This has led to job losses amongst these traditional retailers. Clothing retailer and department store Debenhams plans to axe 320 management jobs in a bid to cut costs in the wake of a profit warning following a disappointing Christmas season. The big three supermarkets, Tesco, Sainsbury’s and Morrisions are all to cut jobs in a bid to improve profitability.
Richard Lim of Retail Economics summed up the situation: "Following a wave of profit warning and job cut announcements, these figures confirm a terrible start to the year for retailers. Indeed, the worst January since 2013. In part, inflation has proved stickier than expected, remaining at uncomfortably high levels for many households. As spending on essentials eats into personal finances, consumers have continued to cut back on discretionary spending elsewhere."