Home improvements boost January retail sales, but price hikes are filtering through

Photo by Jonny Gios on Unsplash.
  • Retail sales up 1.9% as covid restrictions ease
  • Non-food provides the biggest bump as people kit out their homes
  • Implied price hikes of 6.8% as inflation bites

Danni Hewson, AJ Bell financial analyst, comments on the latest ONS retail figures:

“After December’s desolation January brought some relief for retailers as people who’d spent entirely too long inside the four walls of their homes decided to splash out to on improvements. And it wasn’t just items for inside houses consumers went hunting for; garden centres also enjoyed an unusual bump as people were back in their home offices staring out windows at their winter landscapes. But the surge in non-food sales did stretch to clothing retailers, despite those post-Christmas discounts people clearly felt they had enough “zoom ready” tops and with restrictions still in place until the end of the month, concluded eating in could be down whilst dressed down.

“Perhaps price rises played a part in the continued slide of food sales, perhaps people were choosing to spoil themselves with a night away from the stove and plumping for home deliveries.  Whatever the reason January was the first month since the pandemic began that food sales dipped beneath February 2020 levels. Even the rush to Eat Out to Help Out didn’t make such a dent and it’s likely enlightenment can be found in the “implied deflator”. Whilst sales over the three months to the end of January were up 3.1% the value of those sales rose by 9.9%. In a nutshell people are having to spend more to buy the things they want and with pennies not stretching quite as far those little treats that have been finding their way into shopping baskets are having to be left on the shelf.

“Unsurprisingly the end of “Plan B” did drag more people out and about and fuel sales were up over the month despite initial restrictions as winter breaks came to end.  But Covid concerns and home working meant sales remained down on where they had been before the pandemic began. Despite the push to get people back into the office many businesses won’t ever go back completely to the way they were. Employees have had a taste of the hybrid world, and some will be loath to give that up without a fight. When you look at the tight labour market it seems workers have the power and employers might just find staff jumping ship if they don’t adapt.

“And adapting is something online-only retailers might also have to consider. Despite the gloomy January weather, despite mask wearing for most of the month, shoppers didn’t stay on their sofas. Here hybrid also seems to be the name of the game with online sales in January falling to their lowest levels since March 2020.  Sometimes people have to get out and touch and try before they buy even if they ultimately reach for their tablets to make the purchase. Online has become an integral part of the retail jigsaw and sales made via those e-baskets are still up on where they were before that first lockdown shifted online growth into high gear.  But it is just a part of the jigsaw though the picture has changed and some of the pieces might still need some repositioning.”

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