Copy article

Strong January retail data may show "people turning to retail therapy to cheer themselves up"

ended 16. February 2024

At 07:00 this morning, the latest official retail sales data was published. It says retail sales volumes are estimated to have rebounded by 3.4% in January 2024, following a record fall of 3.3% in December 2023 (revised from a fall of 3.2%). This was the largest monthly rise since April 2021 and returned volumes to November 2023 levels. Sales volumes in all subsectors except clothing stores increased over the month, with food stores such as supermarkets contributing most to the increase. More broadly, sales volumes fell by 0.2% in the three months to January when compared with the previous three months, however this was the smallest fall since August 2023. Newspage asked experts why, against a background of recession, rising insolvencies and record direct debit failures, this is happening, and how it could impact the next base rate decision. Their views are below.

11 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Andrew Montlake
Managing Director at Coreco
It seems the best therapy in hard times is retail therapy as people embraced the January sales in a show of utter disdain to the prevailing economic gloom. In a precarious environment we can only hope that this medicine does not prove to be a bitter pill with after-effects of easy credit such as Klarna leading to missed payments and broken credit scores. That said, it also points to the resilience of people who have been battered and bruised by events they cannot control and bad political decisions over a number of years saying enough, I am getting on with my life and damn the consequences. The Bank of England will be as confused as anyone by these figures, but they should be very careful with their next action. The country is hurting and it needs proper relief in the form of a rate cut.
Copy

Editor
Ben Perks
Managing Director at Orchard Financial Advisers
This is intriguing data. I don’t for a second think that all of a sudden the consumer has significantly more spare cash than they did in December. Is this increase because people are being savvy and utilising the January sales for big spends? Or while doing Dry January did people hit the shops rather than pubs? It will be interesting to see how the Bank of England view this. With the country in a recession and calls for rates to be cut, there is a chance they will take note of this increased spending and hold the base rate. I certainly hope not for the sake of borrowers.
Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
Given the large fall in sales in December, there was likely to be some form of catch-up in January’s figures. What we cannot see is how much of this spending is cash or finance, and given other data this week such as the increase in direct debit failures, it points towards people turning to retail therapy to cheer themselves up. Of course, this only adds to the debt burden. Has Klarna seen a booming January, too?
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Interest rates are still high, inflation is high, the country is in recession but people are still spending. It appears that even amongst the gloom we still need retail therapy. I think a lot of what we're seeing is anxiety purchases as many households are on the brink.
Copy

Editor
Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
Amid all the doom and gloom, and financial pressures, are these figures more indicative of people wanting to pick themselves up and comfort shop? It’s easy to buy anything on Klarna now, even an item as low as £30 offers an instalment plan. These figures may highlight emotional strain more than financial resilience.
Copy

Editor
Michelle Lawson
Director at Lawson Financial
Great to see people spending again but at what cost? We have seen failed direct debits on the rise and record financial difficulties but the figures don’t reflect it. Further proof that you can’t rely on history to change a situation. Could be a sign that the public have had enough doom and gloom and need some retail cheer? But sadly we all know the remifications: even more strain on finances.
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
As money has been tight for many households after being squeezed on all sides by the increasing cost of living, these figures showing greater than expected retail sales in January. They are likely due to two factors. The first could be getting through the blue Monday period via spending and likely on credit, which aligns with data showing increased credit usage. The second could be families deciding to do their festive shopping in the January sales for better value and spending gift cards received in their stockings. Of course the retailers won’t care on the why, and will just be delighted to catch a break and grab some air at the surface before being pulled under again.
Copy

Peter Stamford
Mortgage Expert at Stamford Home Finance
We discovered on Thursday that the UK was in a technical recession, but apparently someone forgot to tell the general public who, according to today's retail sales data, have been spending much more than expected. This is good news for retailers, but bad news for potential homeowners as the Bank of England Monetary Policy Committee, who seem determined to keep the base-rate high, will use this as evidence to hold their stubborn position.
Copy

Graham Cox
Director at Bridging Hub
After a very poor December, January's retail figures on the face of it appear to indicate a recovery in consumer confidence. However I suspect it's more likely a result of very heavy discounting as retailers shift high volumes of unsold Xmas stock and winter goods.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
There's a huge disconnect between this retail sales data and the direct debit failures confirmed yesterday. The general public, it seems, are spending on credit regardless of the situation all around them. An uptick in December is expected, but one in January beggars belief. The Bank of England needs to act cautiously in its March monetary meeting as the ducks are refusing to line up and the current economic data is frankly schizophrenic.
Copy

Akhil Mair
Director at Our Mortgage Broker
In the wake of a challenging economic landscape, the latest retail figures for January 2024 offer a glimmer of hope and resilience with the retail sales volumes estimated to have rebounded by 3.4% in January, following a record fall in December, it seems that consumers are embracing a bit of retail therapy to lift spirits.

The 3.3% decline in December 2023, revised from a fall of 3.2%, underscores the volatile nature of consumer spending amid uncertain times. However, the subsequent uptick suggests that people are turning to retail as a means of cheering themselves up and finding moments of joy amidst the turmoil.