Today’s official retail sales data from the ONS show a clear slowdown in growth. Sales volumes* excluding fuel increased 1.9% in January, compared to the same month in the previous year. This is a significant fall from the 6.9% recorded in December – and the pace of growth more broadly over recent months. So the question is: does this mark the end of UK retailer’s positive sales run?
You could argue it’s too early to say. Firstly, this data only covers a single month and will be subject to (slight) revision. Secondly, after a strong Christmas – where a lot of shoppers told us they’d spent more than they’d planned – it makes sense that many households would tighten the purse strings in January. Finally, demand is likely to have been dampened as a result of prices creeping up over recent months – not only in shops, but at the fuel pump too.
From a more pessimistic perspective however, we see a lot of evidence from our research that supports the likelihood of slowing retail sales over the coming months. Shoppers firmly expect prices will continue to increase and anticipate a squeeze on their personal finances. And while the Brexit vote hasn’t significantly knocked consumer confidence to date, shoppers are already starting to exhibit more cautionary spending habits – shopping around more and seeking out coupons in particular.
The reality is that forecasting is incredibility difficult at present. Shopper behaviour is becoming increasingly unpredictable and we still really don’t know what the full implications of leaving the EU will be.
Over the coming months, the picture will become more clear. In the meantime, we expect retailers and their suppliers will be bracing themselves for a bumpy ride.
* Chained volume of retail sales, non-seasonally adjusted