British shoppers started spending again at the start of this year after a very sluggish end to 2019, adding to signs that improved sentiment since December's election is translating into stronger economic activity.
Retail sales volumes rose 0.9% on the month in January on a seasonally adjusted basis, after a 0.5% fall in December, Britain's Office for National Statistics said on Thursday.
This was the biggest rise since March and a stronger turnaround than the 0.7% month-on-month growth predicted on average by economists in a Reuters poll.
The bounce back was even more marked if fuel sales are excluded, with sales up 1.6% on the month, the biggest increase since May 2018 and above all forecasts in the Reuters poll.
Political Deadlock
Consumer demand faltered in the latter part of 2019 against a backdrop of political deadlock in parliament over Brexit.
This culminated in a snap election in December that returned Prime Minister Boris Johnson to office with a comfortable majority. Business and consumer sentiment has improved since then, as Britain left the EU on 31 January with an 11-month transition deal.
Sales at petrol stations fell by 5.7% in January, the largest since April 2012, which the ONS linked to higher fuel prices, while clothing sales grew by the most since May 2018 after several months of weakness.
Annual sales growth remains lacklustre, however, up just 0.8% on the year after 0.9% annual growth in December, broadly in line with economists' forecasts.
Excluding fuel, sales did not grow at all over the period from August to December, the weakest such run since comparable records began in 1996.
Clarity Over Brexit
Earlier in 2019 consumer demand had been robust, helping support growth at a time when businesses had put investment on hold until there was more clarity over Brexit.
Britain has now left the European Union, and an 11-month transition deal expires at the end of the year, after which there will be customs checks and potentially tariffs on trade with the EU, as well as curbs on immigration.
January figures from the British Retail Consortium showed a slowdown in spending to 0.4% from 1.9% growth in December.
Asda, the British supermarket arm of the world's biggest retailer Walmart, said on Tuesday that increasingly budget-conscious consumers were behind a fall in underlying sales in the key Christmas quarter.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
