Retail sales
Retail sales rose in January after December fall Getty

In January 2023, the Office of National Statistics (ONS) revealed that the retail sales volume rose by 0.5%, following the December 2022 fall of 1.2%. Reacting to this, Rebecca Crook, Chief Growth Officer, CI&T, said it's important that retailers use strong digital ways to survive this period.

This is because, according to her, times are difficult for retailers, and there will probably be further brand store closures in months to come.

Crook added that January inflation and rising sales increased retail sales by 0.5%.

She said, "The reality of the cost-of-living crisis has now really set in for consumers, who are tightening their belts to cope with the financial strains on them, as many are largely sticking to essential shopping."

Read more

The Retail Bulletin said that while there were stronger retail sales than expected as consumers continued spending, "the numbers show that people cut back on buying due to the surge in costs."

Darren Morgan, ONS Director of Economic Statistics, also noted that after a steep fall in December, sales in retail slightly increased in January. Still, the general trend shows there is a decline.

Morgan continued, "In the latest month, as prices continue to fall at the pumps, fuel sales have risen.

"Meanwhile, discounting helped boost sales for online retailers as well as jewellers, cosmetic stores, and carpet and furnishing shops."

Paul Dales, the Chief UK Economist at Capital Economics, believes the data by ONS shows that the "activity is holding up fairly well."

According to him, there are two reasons to avoid getting carried away with the increase in retail sales. Dales described the first as weak retail sales in the previous year. He further explained, "Overall consumer spending only held up due to stronger non-retail spending - particularly in restaurants.

"When households' finances are under pressure, it is possible that any improvement in retail sales will just be met by a softening in non-retail spending."

Dales also warned about the impending impact of the higher interest rates. "Although the biggest falls in real incomes are behind us, the full drag on activity from higher interest rates has yet to be felt," said the Chief UK Economist.

He also believes that it is too early to determine if the retail sector is coming out of its funk and that the economy won't yet fall into a recession.