Retail sales unexpectedly bounced back last month, boosted by a spike in spending in supermarkets and other food stores as cash-strapped consumers ate at home more.
Following a disappointing Christmas trading period, figures from the Office for National Statistics (ONS) show retail sales volumes rose by 1.7% in January. This is much higher than the predicted rise of 0.3% and the first growth since August.
Food retailers saw volumes jump by 5.6% – the largest rise since March 2020 and the end of four consecutive monthly falls. Supermarkets, specialist food stores like butchers and bakers, and alcohol stores all saw increased demand over the period.
However, non-food retailers registered a fall of 1.3% in January, with the ONS suggesting the fall was due to reduced consumer confidence hitting demand for clothing and household goods.
Whilst the figures suggest retailers received a much-needed boost at the start of the year, Nicholas Found, Head of Commercial Content at Retail Economics, noted that trading conditions remained challenging across much of the market. “January’s sales ultimately failed to recover losses from a weak golden quarter,” he said.
“Shoppers took advantage of widespread January discounts, reinforcing the shift towards value-driven behaviour – a trend becoming deeply ingrained as the economy navigates a long and uneven path toward stable inflation and growth.
“Retailers now face tough decisions on how to mitigate rising tax burdens from April, whether through squeezed margins, increased automation, or passing on higher operating costs. This combination will inevitably impact investment in the workforce and put pressure on pricing strategies.”
Kris Hamer, director of insight at the British Retail Consortium (BRC), added: “2025 got off to a good start with retail sales managing to weather the stormy January. Retailers put on extensive promotions, and customers who were looking to upgrade their furniture and household electrical appliances made the most of the many bargains that there were to be had. But, with consumer expectations for the economy falling almost 40pts since July 2024 and an unsteady job market, the next few months are hard to predict.”
NAM Implications:
- As expected, there was a real difference in food and non-food performance.
- In that, where possible to postpone the purchase, consumers either searched for a value or postponed until ‘things improved’.
- The issue being that cooking at home comes at the expense of hospitality.
- And as home-cooking shoppers become more savvy re the cost of ingredients…
- …hospitality suffers a double whammy.
- We are undergoing fundamental change, again…
