Retail sales show surprise 0.9% upturn in January

Retail sales grew in January, up by 0.9 per cent on the previous month, the largest monthly gain since April 2011, according to official data released by the Office for National Statistics (ONS) out today.

The increase is welcome news for the UK economy and is surprising as both the British Retail Consortium (BRC) and the Confederation of British Industry (CBI) latest surveys from January showed weak data.

Howard Archer, Chief UK & European Economist at IHS Global said: "This is a major surprise, and a very pleasant one. Given the key role of consumer spending, the unexpected and impressive 0.9% jump in retail sales volumes in January is a massive boost to hopes that the economy has returned to growth following the fourth quarter contraction of 0.2% quarter-on-quarter, especially as it follows on from improved news on manufacturing and services activity in January."

The data shows a 1.6 per cent rise in the value of sales over the past three months and a 1.3 per cent rise in sales volumes over the last quarter. Retail sales increased in value by 4.4 per cent in January 2012 and in volume by two per cent compared to January 2011.

A rise in sales in January is not as unusual as might be expected. In fact, January 2010 is the only year which has seen a fall in sales in the month of January since 2005 and that was mainly due to winter weather.

The value of sales has risen faster than the volume of sales and this is because of a rise in shop price inflation. In January 2012 this was caused by fuel, clothing and footwear.

The value of sales grew faster for small stores than for larger stores. The ONS reports that overall business retail sales values grew by 4.1 per cent but larger stores saw growth of three per cent whilst smaller stores saw sales growth of 8.5 per cent.

Non-store retailing, mainly made up of online sales saw the fastest rate of increase showing year-on-year growth of 13.3 per cent. In January 2011 the total value of internet sales was £462.1 million, making up 8.9 per cent of all retail sales. In January 2012 the value of internet sales had risen to £640.4 million and made up 11.9 per cent of all retail sales.

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