UK retail sales flatline again after bruising Christmas
UK retail sales flatlined for the third month in a row in January, survey data showed today, as Britain’s high street braces itself for “another tough year for the sector”.
The CBI’s distributive trends survey said sales were also expected to be flat next month, marking a disappointing start to the year for the UK’s retailers.
Anna Leach, CBI deputy chief economist, said: “A challenging Christmas has extended into the New Year, with little expectation of any improvement soon.”
The survey came just two days ahead of Threadneedle Street’s interest rates decision. Traders think there is roughly a 50-50 chance of a cut, reflecting the mixed economic data that has recently been released.
Following Boris Johnson’s thumping election victory in December, various surveys have shown a surge in business confidence. A closely-watched gauge last week showed that the enormous services sector is in high spirits.
Yet the UK economy grew is thought to have grown at its slowest rate since the financial crisis in 2019, with the most recent data particularly bad. Meanwhile, inflation has remained below the Bank’s two per cent target.
Today’s retail data indicates that UK consumers are not as cheery as businesses following the election. The business body said sales were poor for the time of year, and are expected to stay below seasonal norms in February.
However, Samuel Tombs, chief economist at consultancy Pantheon Macroeconomics, said the CBI’s report is unlikely to have a big influence on the BoE’s rates decision.
He cautioned that “the sample size has gradually declined over time – and the main balances no longer are closely correlated with the official data”.
More important will be the PMI survey released tomorrow, a closely-watched gauge of the health of the private sector. An initial estimate last week showed a surge in confidence. If this is repeated, it would increase the chances the BoE will leave rates untouched at 0.75 per cent.
Nonetheless, Leach said: “Both official data and business surveys are painting a picture of subdued activity for retailers.”
Cormac Nevin, investment analyst at Beaufort Investment, said an interest rate cut “would be highly premature”.
“While retail sales may have been poor in aggregate, most of this is down to disruption surrounding high-street business models,” he said.
Although overall sales volumes were flat in January, growth in internet sales picked up and is expected to accelerate further, the CBI said.
Leach said action must be taken to address the retail malaise. “The upcoming Budget provides an opportunity for the chancellor to support retailers, primarily by fixing the broken business rates system,” she said.