Retail sales below inflation but leisure showing resilience

Consumer spending continued to remain below inflation in January, although the leisure sector proved resilient with better-than-expected results.

The data from the British Retail Consortium (BRC) and KPMG showed spending rose by 4.2% in January, compared to an increase of 9.7% in an Omicron-marred 2022. Both these numbers were below the rate of inflation, however, which was as high as 10.5% in December.

The BRC’s retail sales monitor warned that increasing cost of living is likely to lead to lower rates of discretionary spending.

Helen Dickenson OBE, chief executive of the BRC, said: “As Christmas cheer subsided, retailers felt the January blues as sales growth slowed. Many retailers discounted heavily to entice consumer spend, and while there were bargains to be had in the January sales, retailers continue to be hit by lower margins and falling volumes.”

“The coming months will continue to be challenging for retailers and their customers. Consumer confidence remains stubbornly low and looming rises in household bills and mortgages mean discretionary spending will remain weak”, she continued.

However, the leisure sector remained buoyant. Further data from Barclays revealed that pubs, clubs and bars saw an increase in sales of 18%, their best increase since May 2022, while restaurants saw an increase of 4.7% compared to December. Transport strikes in the festive period, as well as a reduction in Covid cases seen a year before, are factors to consider when looking at this growth.