Prolonged UK lockdown hit January sales harder than expected

- Sales fall by second sharpest monthly drop on record

- Food stores and non-store retailers bucked the negative trend

- Online retailers picked up further market share from high street

- GBP/USD hit 1.40 as it shuns poor retail data for vaccine optimism

 

 

By Harry Daniels

LiveSquawk News

@harry.daniels71

 

19 February 2021 / 10.00 GMT

 

 

London – Nearly all sectors felt the effect of tighter restrictions as retail sales fell sharply in January, according to the Office for National Statistics.

 

Headline retails sales slumped by 8.2% month-on-month in January, this compared to forecasts of a 3.0% drop and well down on December’s 0.3% rise. Annually, sales fell by 5.9% versus 2.9% last month and -0.8% predicted.

 

Sales excluding auto fuel saw a similar plunge. On the month, sales sank 8.8% versus an expected fall of 2.1%, following a 0.4% rise previously. Annual sales printed down 3.8%, reversing the 6.4% December rise.

 

The ONS said, “Retail sales volumes were 5.5% lower than before the pandemic in February 2020 indicating that the impact of restrictions on the retail sector was not as large as that seen in April 2020 during the first full month of retail restrictions when sales fell by 22.2% when compared with levels before the pandemic.”

 

Declines were felt across every sector except non-store retailers and food stores, which reported growth of 3.7% and 1.4% respectively.

 

There were heavy declines for both clothing stores and automotive fuel in January. However, evidence suggests lockdown has continued to drive web sales, with all online store types reporting gains. The ONS said the proportion spent online soared to 35.2% in January 2021, the highest on record; this compares with 29.6% in December and 19.5% reported in January of last year.

 

ING’s Developed Markets Economist, James Smith noted that the effect of the latest restrictions should be put into context and have likely been amplified by what is typically a quiet time for retailers. “The period after Christmas is always a difficult time […] and the fact it coincided with the second nationwide lockdown contributed to a sharp 8% fall in sales. This should bounce back rapidly on reopening of the economy, but the pandemic-induced switch to online retail is unlikely to be reversed, posing ongoing challenges for the high street.”

 

Market reaction was reserved, the pound largely ignoring the data. Cable traded around 1.3970-80, following the release.