- Retail sales volumes fell a substantial 8.2% month-on-month (m/m) in January as they were affected by the renewed closure of non-essential retailers in the latest lockdown
- This was double the 4.0% monthly fall in November during the previous lockdown, adding to the evidence that consumers are adopting a more cautious approach during the current lockdown than they did in November
- January’s fall in retail sales occurred despite a significant rise in online sales, up 9.2% m/m and 72.7% year-on-year (y/y) in value terms. This took the share of online sales up to a record 35.2% of total sales
- In the near term, consumer spending will continue to be affected by the ongoing closure of non-essential retailers and large parts of the hospitality and leisure sectors
- Today’s data also add to evidence that the economy has been much more affected by the latest lockdown than was the case back in November
- With lockdown likely to last through Q1, the EY ITEM Club expects the economy will experience a clear contraction this quarter – possibly around 4% quarter-on-quarter (q/q)
- After Q1, the EY ITEM Club expects the economy to benefit progressively through the year from the roll-out of COVID-19 vaccines
- Consumers look well-placed to play a key role in a pick-up in the UK economy from Q2 given the recent high savings ratios, although much will depend on how much unemployment ultimately rises. After an extended period of weakness, business investment is expected to gain momentum over the course of the year as companies grow more confident in the economy
- The EY ITEM Club’s recent Winter Forecast sees GDP growth of 5.0% in 2021 followed by expansion of 6.5% in 2022. This means the economy regains its peak level of Q4 2019 in Q3 2022.
Howard Archer, chief economic advisor to the EY ITEM Club, says:
“Retail sales volumes contracted again in January – and substantially – as they were affected by the closure of non-essential retailers during the latest lockdown.
“Retail sales volumes fell 8.2% month-on-month in January which caused them to be down 5.9% year-on-year. They had been up 2.9% year-on-year in December.
“Retail sales volumes had previously risen a modest 0.3% month-on-month in December as they gained a limited benefit from a temporary opening up of non-essential retailers after November’s lockdown. November saw retail sales volumes fall 4.0% month-on-month, which had been the first decline in seven months.
“Retail sales volumes in January were 5.5% below their pre-pandemic February 2020 level.
“The ONS reported that ‘all sectors saw a monthly decline in volume sales in January 2021 except for non-store retailers and food stores, who reported growth of 3.7% and 1.4% respectively when compared with December 2020.’
“January’s fall in retail sales occurred despite online sales rising 9.2% month-on-month and 72.7% year-on-year in value terms. Indeed, online sales’ share of total retail sales rose to a record 35.2% in January after dipping to 29.6% in December from 31.4% in November. This was up markedly from 19.5% in January 2019.
“The strong indication is that the recurring restrictions on non-essential retailers have given extra impetus to an already rising underlying trend for online sales.
“The annual retail sales deflator fell 1.0% year-on-year in January, with fuel prices down 7.6% year-on-year. Excluding fuel prices, the annual retail sales deflator was down 0.4% year-on-year in January.”