British retail sales unexpectedly rose in January, the Office for National Statistics said on Friday.



On the face of it, January's official UK retail sales figures suggest that a recovery in high street spending is gaining momentum.

However, January's strong growth goes against the much more pessimistic picture painted by anecdotal evidence and all of the retail surveys.

Accordingly, the official figures may not be giving a true reflection of conditions on the high street. And even if the figures are taken at face value, there are reasons to think that this strong growth cannot be maintained.

The rise was partly driven by a strong 4.8 percent monthly rise in household goods sales, which just seemed to be a bounce back after several months of falls.

And more generally, with unemployment on an upward trend, credit conditions tightening and real incomes still being squeezed, the underlying conditions for consumers are still tough.


The figures are a big surprise to the upside.

In our view something will have to give, but we would note that the retail sales figures aren't the only figures that are pointing in an upward direction

It's early days yet, there are always frequent warnings at this time of year about the unreliability of the data, specifically the December and January, but it would be unwise to dismiss them completely.

Lower inflation in itself does not add purchasing power to households' pockets, it simply slows down the erosion, but there may be a confidence effect and if many in the private sector gained pay rises in January, that might have helped.


Very good news and impressive given the extent of the improvement we saw in December.

It reinforces the case for a strong Q1 GDP (reading), it supports the robust PMI surveys and the robust labour report.

It suggests at the very least that we will be growing by 0.5 percent quarter-on-quarter in the first quarter and probably faster than that.

That is above potential and is exactly what the Bank of England wanted. They will feel vindicated that quantitative easing is working.