Retail sales volumes rose 1.9% in January, ONS reports

Retail sales volumes rose by 1.9% in January 2022 following a fall of 4.0% in December 2021 (revised down from a fall of 3.7%), according to the latest data from the ONS. Sales volumes last month were also 3.6% above their pre-coronavirus (COVID-19) February 2020 levels.

Non-food stores sales volumes rose by 3.4% in January 2022 as home improvement sales volumes picked up with increased sales in household goods and garden centres; non-food sales volumes were 1.1% below their February 2020 levels.

Automotive fuel sales volumes rose by 4.1% in January 2022 following a fall of 5.0% in December when increased home working and lower retail footfall reduced travel; sales volumes in January 2022 were 3.3% below their February 2020 levels.

Food store sales volumes in January 2022 fell below pre-coronavirus levels for the first time and were 0.8% below where they were in February 2020.

The proportion of retail sales online fell to 25.3% in January 2022, its lowest proportion since March 2020 (22.7%), continuing a broad downward trend since its peak in February 2021 (36.5%); despite its downward trend, the percentage of retail sales made online was still higher than before the coronavirus pandemic (19.8% in February 2020).

Aled Patchett, head of retail and consumer goods at Lloyds Bank, said: “January’s return to growth is something of a New Year’s bonus across the sector, with most having anticipated a slow month due to the rapid rise in the cost of living beginning to put pressure on household budgets.

“Longer-term, the sector will need to consider how willing, and indeed able, it is to absorb inflationary pressures, which include their own commodity, energy, labour and shipping costs. At a time when the sector is being boosted by recovering footfall as Covid restrictions ease and workers return to the UK’s towns and cities, a delicate pricing balance needs to be found to protect margins whilst encouraging consumers to spend against a backdrop where their disposable incomes are reducing.”

Jessica Moulton, senior partner, McKinsey & Company. comments:  “Sales volumes grew nicely despite a whopping increase of almost 7% in prices. This volume increase shows consumer keenness to spend and make up for the damper that Omicron put on Christmas.”“Online grocery continued to pull back as expected, as restaurants recover and the portion of grocery shoppers who were pushed into online purchasing returned to their preferred ways of shopping.”

Lynda Petherick, head of retail at Accenture in the UK & Ireland, said: “The partial rebounding of sales in January suggests some new year enthusiasm among shoppers, with signs we are moving ever closer to traditional trading patterns in line with pre-pandemic levels.

“After a turbulent 2021, the sector has worked incredibly hard to recover lost ground from the early stages of the pandemic. With the lifting of nearly all COVID-19 restrictions, retailers will now be contemplating the next great unknown: the post-pandemic era.

“Normally a quieter trading month than December, January’s stronger performance will be welcomed by retailers, but inflationary troubles and the rising cost of living are likely to cast a dark cloud over the sector, particularly as households are beginning to keep a closer eye on their outgoings.

“Coupled with increasing fuel prices that impact logistics and a labour market that remains tight, firms are facing mounting pressure to maintain their margins. Nonetheless, this is a promising start to the year, and businesses will have to ensure they’re giving consumers every reason to continue shopping with them in the coming months.”

Silvia Rindone, EY UK&I retail lLead, comments: “Retail sales in January landed strongly for what is traditionally a quiet trading month. This was especially encouraging considering December’s disappointing performance. While online sales fell, levels are still well above pre-pandemic levels – a trend in consumer behaviour which is here to stay.

“While the latest data suggest that sales are returning to pre-pandemic patterns, consumer spending will face two significant challenges in the first half of this year: the squeeze on household incomes from rising inflation (the January CPI measure reached a 30-year high) and a rise in energy bills and personal taxes in April.

“With the rising cost of living and the ongoing recovery concerning consumers, retailers will be competing for the same share of squeezed wallets. At the same time, they must balance increasing pressures to drive a more sustainable business. Now more than ever, retailers must focus on shaping a long-term strategic direction with robust operations and financial agility to fund this important and complex transformation.”

James McDonald, retail partner at Deloitte, said: “Retailers avoided the January blues as consumers made use of end-of-season discounting. Both sales values and volumes recovered from December’s subdued performance, increasing by 2.0% and 1.9%, respectively. Year-on-year, values 6.5% and volumes 9.1% are also up, albeit this is not a like-for-like comparison with the UK under strict lockdown restrictions in January 2021, with all but essential stores closed.  

“Today’s figures form the initial sketches of a more positive picture for retail recovery in 2022. Despite worries about inflation, consumers continued to spend. The loosening of restrictions has resulted in more consumers heading to the high street and boosting overall in-store footfall.

“Improved stock levels for large ticket items and a strong housing market boosted spending for the home, as non-food sales volumes grew by 3.4% compared to December. Whilst January food sales volumes slowed in contrast, falling 2.3% month-on-month, this is likely a result of more consumers rebalancing their shopping trolleys from December’s festivities. This also marks a return to pre-pandemic levels.

“The rising cost of living is firmly front of mind. 29% of UK consumers expect their personal expenditure to go up in the first quarter of 2022 due to rising inflation, and more expensive utility and grocery bills.

“The question is whether retailers will absorb growing costs or pass this on to the consumer, adding further strain to consumer pockets and impacting the industry’s speed of recovery. Finding ways to continue to entice consumers to spend in-store or online will be key to a sustained recovery for the retail industry. To aid this, many retailers are exploring new digital ways of engaging with consumers both online and in-store.

“This could prove pivotal in the months ahead as those consumers who are in a position to spend head out as the economy continues to open up.”